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Rare Coin Journal Better Investment Ideas In Precious Metals & PCGS Rare Coins 1-800-225-7531 With Richard Schwary Welcome to a look at what makes the coin business an interesting experience. One in which profit or loss is part of everyday trading. Which side of this equation you are on will depend on how informed you are, and to some degree how good you become at choosing the right coins. But don't overlook the historical importance coins offer you and your family. Coins are pictures of the world which relate the stories of their time. That is why we at California Numismatic Investments work at answering questions. As usual all comments, good or bad, are welcome so Email (RSchwary@aol.com) with your thoughts. Oct 1 - Dec 31, 2009 1. The CNI Holiday Schedule might prove helpful and let me also add that approaching Christmas everything mail related slows down considerably so expect the usual shipment delays in December. We celebrate Thanksgiving on Thursday Nov 26th so we will close the 26th and the 27th for too much turkey. Christmas falls on Dec 25 (Friday) so we will close Thursday the 24th and Friday the 25th coupled with the usual Saturday and Sunday. The New Year also falls on a Friday, Jan 1st so CNI will close Thursday and Friday of this week too. And as the 2009 year draws to a close let me thank you all for another banner year here at CNI and also wish you the best of God's blessings for the holiday season. 2. So what's all this confusion among gold commentators these days? You would think that with recent strong moves to the upside everyone would be celebrating, but this is not the case. It would seem no matter what happens there are always a few who will not be happy. If you look at 5 year gold charts or longer you will see a steady growth in this still evolving bull market which began in the low $400 range. If you consider only the last year you will see gold traded from the $700 level to the $1100 level, spending most of that time around or under $1000. And all of this good pricing news came during an unprecedented collapse in most other financial assets including real estate, but few seem to appreciate the unique feature gold offers in the middle of this financial hurricane. Gold is money, with no offsetting debt, and thus represents unprecedented security. And so, during this developing bull market, there are the usual fundamental commentators waving a long finger saying higher prices are a commodity bubble. The reasons given make sense and range from a depressed Indian jewelry trade or a growing cap on the price of gold because of the increased selling of scrap to the lifelong threat of future IMF and Central Bank selling. Now don't get me wrong, as all of these observations are true and will have some short term effect on the price of gold. But I hand out this peal of wisdom daily: Don't become a short term price watcher, as this only leads to confusion over the bigger picture. Many of my friends are called technical traders, and they have liked the emerging chart patterns for sometime, but fundamentalists consider these folks to be possessed and without merit. We are big chart watchers here at CNI, so when in house technical expert Alex Sanchez commented that the just completed head and shoulders pattern portends $1400 gold the entire store took notice. Now everyone knows that the physical market is actually peanuts when compared to the huge gold paper market, but we are dedicated physical traders so what actually happens with bars and coins is very important to us. Gold bullion sales volume at CNI has been steady, but many walk-in customers wonder why the place is not more crowded? The reasons are twofold, being wide Internet participation and free shipping. In a few minutes new small and midsize buyers all over the country can get a quote and place a secure order. And larger buyers, facilitated by bank wires, make the process even faster. It is no longer necessary to visit your friendly bullion dealer, and more importantly gold is no longer just for "gold bugs". So what has this to do with the gold price today? Actually a great deal because the reality of the unheard of expectation is just around the corner. In my opinion this is both a blessing and a curse of sorts because it can lead to only one logical conclusion. The amazing confirmation of unheard of gold prices will surprise even seasoned traders, but will produce much larger and more dramatic price swings encouraged by a now worldwide audience. In the old days if someone said the price of gold would be $5000, everyone in the room would consider the speaker a goof, but today the amount of fiat currency in the world portends this type of market. And don't think the stock market or banking system is going to collapse in the process. Everything will eventually look very similar to what was happening prior to the big melt down, but the dollars sloshing around simply won't be worth much. It is very possible that Mr. and Mrs. America could go to sleep thinking everything in the world has finally settled down, and wake up to their first cup of coffee realizing something is terribly wrong with their buying power and their perceived safety in US dollars. So how many readers will say that most gold bullion dealers are now fear mongers? Believe me, I'm Mr. Conservative when it comes to life in general, with the same wife, same car, same church, same everything for decades. But now I face a government that, with good intentions, seems to have lost its sensible compass and I can't be the only one with these feelings. That is why I believe we are seeing a slight shift in world banking and even sovereign nations when it comes to their gold thinking. I admit this is not mainstream, but there is a developing sense that gold reserves are now a good thing. It surely is not paranoia but a few years ago the notion that the dollar might be replaced was just total nonsense. And don't fall for the "it's too late" warning because this roller-coaster ride is just beginning. At today's price of $1100 how much downside could there be in gold with all this government spending? Let me answer my own question and guess perhaps a few hundred dollars at most, but how much upside is there if these storm clouds continue to grow? In real terms people in this business are now talking quietly about what were once considered crazy numbers for gold. Such numbers would make your current up-side verses down-side ratio more than 20 to 1, and while certainly not a sure thing I continue to add to my gold position to the tune of about 30% of my net worth because it makes sense to protect against calamity. I used to think that 20% of my net worth should be in gold, but have recently moved to 30% because I can see no way around a highly inflated currency to bail us out of these unprecedented spending programs. If I am wrong I will not have lost much, but if I am right I will have protected my entire life savings. There is much more to this story so I will be adding commentary as this most recent surge settles down, but consider carefully this admonition: It is better to be in gold too high than to risk not taking the steps necessary to protect yourself over the next decade. 3. Since I made the comment of percentage of net worth in gold I have had emails asking for more details, so perhaps this should be looked at more carefully. When I raised by personal dollar commitment from 20% to 30% in gold I mean 30% in gold bullion. I don't consider silver dollars, certified gold sets, circulated gold pieces, type coins, commemoratives or anything else numismatic or semi-numismatic to be a portion of my core gold bullion holdings. So if you consider that my complete holdings in hard assets contains all of the latter categories then the percentage in hard assets is considerably more than 30%. Stated another way I think that all serious investors should have a core holding of gold bullion no matter which way the market moves. This is not as easy or as profitable as it may seem because I began this strategy in the early 1970's and so was underwater in my gold bullion holdings for more than 2 decades. Still I would recommend this approach to anyone who looks at hard asset investing as a true diversification. In other words both these contrarian investment areas (bullion and numismatics) should not only be measured in dollar gains or losses. In my case the gold bullion portion provided protection against government meltdown for the majority of my career and the numismatic portion provided a historically important link which I could hold in my hands. Both did, over the longer term provide monetary gains but for me the added protection against strictly papers assets seemed to trump actual dollars gains. Both of these areas, precious metals and rare coins, have both brilliant and checkered pasts depending on where in the market cycle you placed your bet. So the proverbial question as to which is the better investment as a check against inflation is impossible to know without the aid of a time machine. That is why it may be best to have a little of both as you hedge your financial bets. 4. During World War II the US Mint stopped producing copper cents in 1943 because copper was needed for shell casings and therefore was placed on the strategic material list. That produced the now famous and very plentiful zinc-coated steel cents of 1943. It was also during this time that the rare 1943 copper cent was struck by mistake because a handful of extra copper blanks were left in the machine during the change-over. I collected coins as a kid in the 1950's and it was then or perhaps a bit later that I was told that the Ford Motor Company offered to give away a car to anyone who found the famous 1943 copper in circulation. I looked for years telling my Mom and Dad that a new car was just around the corner and it was not until after I got out of the service that I found out the story is a myth. To read more about such coin tales get a copy of the new Fascinating Facts, Mysteries & Myths About U.S. Coins by Robert R. Van Ryzin. It is a good read and guaranteed to teach you a few hidden secrets about the coin trade. 5. So the gold market is getting crazy which brings out all kinds of opinions, pro and con for owning the stuff, including negative comments about fear mongering from coin dealers. Well take a look at this CNNMoney.com take on the amount of money our government is blowing out the door and perhaps my concerns will prove warranted. And for the record this type of analysis is all over the Internet, and not an isolated opinion. $4.8 trillion - Interest on U.S. debt Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels. NEW YORK (CNNMoney.com) -- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. More than half. In fact, $4.8 trillion. If that's hard to grasp, here's another way to look at why that's a problem. In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group. On the bright side - such as it is - the record levels of debt issued lately have paid for stimulus and other rescue programs that prevented the economy from falling off a cliff. And the money was borrowed at very low rates. But accumulating any more interest on what the United States owes at this point is like extreme sport: dangerous. All the more so because interest rates will rise when private sector borrowers return to the debt market and compete with the government for capital. At that point, the country's interest payments could jack up very fast. "When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt," Konigsberg said. Some increase in rates is baked into the cake of the Congressional Budget Office estimates. But there is always a chance those estimates may prove too conservative. And then it's Vicious Circle 101 - well known to anyone who has gotten too into hock with Visa and MasterCard. The country depends heavily on borrowing to fund what it wants to do. But the more debt it racks up, the more likely it becomes that creditors could demand a higher interest rate for making new loans to the government. Higher rates in turn make it harder to pay off the underlying debt because more and more money is going to pay off interest - money, by the way, which is also borrowed. And as more money goes to interest, creditors may become concerned that the country can't pay down its principal and lawmakers will have less to fund all the things government is supposed to do. "[P]olicymakers would be less able to pay for other national spending priorities and would have less flexibility to deal with unexpected developments (such as a war or recession). Moreover, rising interest costs would make the economy more vulnerable to a meltdown in financial markets," the CBO wrote in its most recent long-term budget outlook. So far, that crisis of confidence hasn't happened. And no one can predict with any certainty whether or when it could occur. But should it occur, the change could be abrupt. That's because the government frequently rolls over - or refinances - the debt it has issued as it comes due. In other words, when a Treasury bond or note matures, the government must pay the investor the face value on that debt. In order to do that, the Treasury borrows money to pay back the investor, which means the debt would be refinanced at whatever the going interest rates are at the time. Just how much churn is there? Of late, a fair bit it seems. A Treasury borrowing advisory committee reported in early November that "approximately 40 percent of the debt will need to be refinanced in less than one year." Since rates may well stay low over the next year, it's possible that debt could be refinanced at the same or even lower rates. But that situation won't last forever. So what will Washington do? To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues. That way the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time. And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected. If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don't increase as much as CBO expects. "There will be less debt outstanding than if we don't get the deficit down. It may also reduce [the average interest rate on the debt] since less debt means less pressure on interest rates," said William Gale, co-director of the Tax Policy Center. But whether they can do that within a few years of an economic recovery is another matter. "Even under the president's [2010] budget as evaluated by the CBO we do not get anywhere close to that," Gale said. That could mean the president's 2011 budget proposals would have to make a lot of changes to get closer to the 3% goal. Unpopular changes like tax hikes and spending cuts. Budget hawks hope the president will push for a deficit-reduction commission to come up with ways to cut the deficit and then propose legislation that lawmakers would only be able to vote for or against. The reason: There is no political will to make the tough calls. Especially in a mid-term election year. July 22 - Sept 30, 2009 1. I decided to watch some television last night, and was bombarded with advertisements about selling scrap gold and jewelry. Of course they all said gold was at an all time high, they also paid the most, and now was the time to sell. CNI does not buy scrap gold because the business in general is too sleazy for me, but we do get calls on a regular basis so here are some general rules to follow. The most important rule is simply do not believe any written or television or radio ad that claims to be the high buyer…they all pay half or less of its real value. It is easy to figure for yourself and if you do the outcome will be decidedly in your favor. Here is an example: Old jewelry stamped 14 K gold is about 58% gold, meaning if it weighs an ounce it would contain little more than ½ ounce of pure gold, so if gold closed at $1000 your trinket would melt for about $580. An honest price would be about 85%-90% so you would get something close to $450, and the buying dealer would melt his larger lot for 98% netting him a fair $50 profit minus mailing and assay charges. If you mailed this chain to one of the television "processing centers" they would call you in a week or two with an offer in the $100 to $200 range, depending on how they sized you up as a seller. The Federal Trade Commission is already at work trying to shut down such operations, but they will simply open up again across the street using a different name so be careful. Your local coin dealer is a better place to start, but even these can be no bargain especially if your quantity is small and they are not really interested in such business. As a general rule expect their prices to begin at 60% and bargain up if they think you are not happy with their quotes. Not all coin dealers are cheap buyers, but you will need to find a specialist before the numbers become fair so shop around before selling. 2. The gold market is again approaching the $1000 mark, and the general sentiment is that because demand from India and other big jewelry players has tanked that this market will remain soft until manufacturing picks up. Now keep in mind that it is true that India is the big dog in this picture, but it is also true that manufacturing can change its mind on a dime and needs to produce to stay viable. The sales of strictly bullion coins at CNI are down by 30% and the million dollar orders are no where to be found, so the public fear factor has abated to some degree. But again the investor portion of the gold bullion market is very fickle and, given our government is in uncharted waters as far as these bailouts are concerned, that fear could return overnight. So watch these three important factors in trying to fathom gold's short term direction: Any signs of inflation from Uncle Sam, which many believe is a foregone conclusion in light of President's Obama huge stimulus, could be the match that ignites the gold rocket. Like I said the ever fickle investor demand, which could also be explosive if the world situation continues to deteriorate. And of course dollar weakness, which has everyone nervous including the Chinese, who are already talking up the notion of a dollar replacement for world currency. But for those looking for a real bargain in gold please keep in mind that while there is some downside approaching $1000, there is not much and I think any retrenchment below $900 will bring in very large buyers and another $75 bounce to the upside. So stick with my tried and true approach of buying on weakness and accumulate gold bullion coins/bars until you reach 20% of your investment pile (more if you are really pessimistic). The gold and silver bullion portion of your portfolio is simply to protect you and the family against an unforeseen calamity much the same way you purchase life insurance. There is plenty of doom and gloom to go around, and the housing numbers still look awful regardless of recent optimistic talk and the commercial market is also looking dark. But it is too early to tell if the President's economic plans will work in the longer run as the majority of money has yet to enter the system. But it may well be that his unprecedented spending has avoided a catastrophic financial failure. This mess will sort itself out, but it will take more time and sweat on everyone's part. One thing is increasingly clear, and that is that Americans are becoming more conservative and saving more. This is good news for our long term financial health, but not good news for the still raging recession as the American consumer is in no shape to lead us out of this black hole, as has been the case in other economic downturns. 3. The premiums charged over spot for gold, silver, and platinum bullion products have finally begun to decrease, and will certainly continue lower through the summer no matter which way prices move in general. Why? Lower premiums are the result of increased production creating more bars and coins for the investor market. This increased availability coupled with the recent collapse in the silver market has created an ideal marketplace to stock up on this undervalued area. Don't miss the combination of lower silver prices and lower silver premiums, a combination which does not come around very often these days. 4. I recently read the annual JM Platinum report and found a particular graph interesting, which covered the last 10 years and figured how much more you had to pay on any given day for platinum over gold. Now keep in mind that platinum bullion has often been overlooked by gold bullion buyers in the past. This will not be so in the future as platinum gets more attention because of its scarcity (it is 10 times more scarce than gold) and its industrial necessity in electronics and environment projects. Also keep in mind that unlike gold, which is hoarded by the Central Banks (and everyone else), there are no industrial stockpiles of platinum. This simply means that when demand increases prices follow in an almost direct fashion. Since 1999 platinum has cost as little as 20% over the price of gold on the low end and as much as 220% more on the high end. As of this writing the low end has been 10% but is now about 20% more, making it cheap in relationship to gold and an exceptional buying opportunity. You are getting a potential 2 to 1 multiple in the price at this time without paying a dime extra! The only problem is that the US Mint has temporarily halted making the American Platinum Eagle, but we do have them from time to time and a good alternative is the Canadian Platinum Maple Leaf. 5. So what is happening in the rare coin market? The summer months are always a little slow for business and this, coupled with our current recession, has not thrown gasoline on rare coin prices, but the certified rare coin market is surprisingly steady. The heat we have seen in prices these past few years has slowed, but there is still excitement out there if you have great coins and your pricing is in line with new lower levels. The collector market for certified rare coins, say less than $15000, is solid simply because this type of material is never around in any quantity. The higher end rarities, which have been mostly driven by speculators, have moved lower but, if the coin is original, there are still plenty of buyers looking for an entry point. The big money that was coming into this area when the financial crisis created fear in the banking system is gone, but there is enough solid interest to keep things interesting. So the key to the current rare coin investment market seems to be looking for value coupled with original looking material. This looks like a great time frame to accumulate hard to find material because it is exactly at times like these that such great coins may become available. When things heat up again you won't be offered this type of selection, and the price premiums will once again move dramatically higher. 6. A partial update from our friends at ICTA should provide enough information for you to contact your Senator with a letter and urge passage of the following legislation: Senate Bill #1367, the "Fair Treatment for Precious Metals Investors Act," was introduced June 25, 2009, by Sen. Michael Crapo (R-ID) and co-sponsored by Senators John Ensign (R-NV) and Harry Reid (D-NV). SB.1367 seeks to amend the Internal Revenue Code of 1986 to treat gold, silver, platinum, and palladium investments in the same manner as stock and mutual fund investments for the purposes of the capital gains tax rates imposed. Under current tax law, gains from investments in precious metals are treated as "collectibles gains" which are subject to a tax rate of 28%. By contrast, investments in stocks and mutual funds are currently subject to a tax rate of 15% if the assets are held for more than one year. If the bill becomes law, all US gold, silver and platinum Eagles would be eligible for the lower tax rate, as well as other bullion coins or bars meeting the requirement for minimum fineness. The bill currently has three cosponsors and has been referred to committee, and the House companion bill is expected to be introduced the week of July 13, if not sooner. 7. This particular paragraph is posted on my site www.golddealer.com under Investment Rules, but I'm getting calls from consumers about what can be done about unsolicited sales calls in the middle of dinner. We at CNI will only contact you if asked to do so, and even then it is usually about an open invoice question. Firms which use commission-based salespeople are relentless about calling you, and if you don't want to be bothered there is an easy fix. Do the best you can to avoid high-pressure sales tactics and take the time to be informed. If you feel uncomfortable buying a coin from a phone person it can be a warning signal. When in doubt sleep on it and decide the following day. CNI does not use commissioned salespeople because it always places the dealer's interest before that of the consumer. To be fair some firms do use commissioned people and they believe in their products. So it's natural for them to get excited over a coin. That's good for it brings you an opportunity, but make sure you ask questions and understand the details. A slower approach is a good idea especially if you are new to this business. Also keep in mind ethical dealers are not interested in bothering you. If you receive unwanted calls just explain this fact, and if they persist draw your own conclusions. The government protects consumers from unwanted phone calls and the process is fast and easy. Check it out by using the following link: https://www.donotcall.gov/ 8. Some national firms are engaged in highway robbery when selling small gold coins to unsuspecting consumers so read this note carefully. Make a distinction early on between bullion related coins and certified rare coins. There is a big difference and not understanding this can lead you down a bumpy investment road. Actually the distinction is easy if you keep a few rules in mind. First a bullion investment is defined by a bullion coin which is not certified and trades for close to its weight. It will go up or down following the commodity price, and there is no rarity to the coin or bar. But here is where it gets tricky. Always figure the cost per ounce of a bullion product for yourself. It is easy to figure what a 1 ounce bullion gold coin should cost, but more obscure when the bullion coin gets smaller. And don't assume that because the dealer is cheap on large bullion coins he will also treat you right on smaller bullion coins. If you like the non-confiscation possibility, which is so often raised today, the smaller bullion coins like the British Sovereign (0.235 Oz Pure Gold) or the French or Swiss 20 Franc (0.186 Oz Pure Gold) work well. Just be sure to multiply their weight times the price of gold. Some dealers charge up to twice our selling price for these smaller bullion coins hoping the buyer will not compare prices. If challenged on their higher selling prices these dealers tell the uninformed investor that their coins are better quality and thus are higher priced. This justification is not true because of the following: All large dealers buy these gold coins from the same international sources, pay the same price, and get the same quality. There is no difference in these coins. The extra money you pay goes into overhead and commissioned sales. Second a certified rare coin may be weight related like the $20 gold piece, but usually is not. When investing in PCGS certified rare coins you are investing in rarity. Price increases depend not so much on higher commodity prices (although it helps), but more on growing demand and shrinking supply. So how do you know if you are paying too much for a certified rare coin? Just like anything else you check around and compare prices. After you have established a good relationship with a dealer this issue becomes less important, but in the beginning do your pricing homework. May 4 - July 21, 2009 1. So the Central States Show is over and, with Long Beach right around the corner, everyone seems to be looking and wondering about the direction of rare coin prices. The price question is, of course, perennial as everyone looks for an investment edge, especially with Uncle Sam flooding Wall Street and now Main Street with more dollars than anyone could have imagined just a few years ago. The price direction of rare coins is also difficult to predict because the market is so large and diversified that a general statement really does not work because of varied collector and investor interest. Still some observations might prove helpful. The collector side of the equation at Central States was solid with floor action and auction bidding doing just fine despite dealer misgivings created by a prolonged and ongoing recession. But, as I have said before, collectors generally know what they are doing and basically have an insatiable appetite for their area of interest. And true collectors rarely sell unless they are trading up, so prices are steady for the right material even in troubled economic times. I once purchased a few years of The Numismatist which were printed during the depression with the notion of making comments on pricing. I was amazed to find not one instance of discounting or even reference to the Great Depression! So even in tough times collectors found the money to collect. Now granted the "investment market" did not exist in 1930 and, by some accounts, really did not come into its own until the early 1970's much to the distain of the true numismatist. Although there are many accounts of price speculation in mint sealed proof sets in the 1960's, and the price swings and dealer price manipulations in the commemorative market were so blatant that our government put an end to the many programs by the mid 1950's. The price of gold did drop during Central States which did not help, but problem free collector coins in the less than $5000 range were steady. This has been true for years because this sector is collector driven, for the most part, meaning speculators are absent and this always makes for an orderly market. The generic gold market looks good because it is popular, easy for the beginner to understand, and pricing is easy to verify. The more common certified US gold coins are also popular because gold bullion is in demand, which is puzzling because although they are related they are not the same. Graded $20 gold pieces are one of my favorite areas of investment for those folks that want some diversification from bullion products but do not understand all the dynamics involved in rare coin investment. Also consider the PCGS MS 63 $3 gold piece struck from 1854 through 1889, which can now be purchased at the lower end of its recent trading range But what about the higher priced "investment" market which can be volatile as "hot" money is moved in and out depending on perceived dollar and bank strength? Most dealers I talked to said the show was disappointing in this area, and they anticipate a long summer unless the gold bullion market breaks to the upside. The Stanford Financial scandal has created minor problems in the auction business but nothing more. At auction the Amon Carter 1804 silver dollar sold for $2,000,000 plus the buyer's fee (15%) to a well respected dealer. This coin is, of course, the most famous of all rare coins with 15 known examples, none of which were actually struck in 1804. The first 8 were produced in the 1830's and remaining 7 some 30 years later and with a clandestine story like that the press is always interested. The Amon Carter coin is in the lower end of the grade census and is slightly circulated if that makes a difference to anyone. What is helpful in its price history is that it traded about 2 years ago in the same price range. This would indicate that the extreme high end of the rare coin market is at least steady for world class rarities which have experienced explosive price growth over the last decade. I also watched some of the auction, and accurately graded fresh material that was all there brought very strong prices. There were many floor buyers and internet action was active but I heard some material was bought back by the original consignor which is not uncommon in a slowing market. It is also important to understand that the auction process is more important today than ever before because it is used successfully to reintroduce liquidity into the rare coin market. Price levels for nice material, not condition census, not outrageous grades, and not a problem coin, were steady but dealers were not willing to push bids higher. What may be happening in this market is that price increases have paused and it is looking for some sort of equilibrium point. In other words there is still action but the "buzz" is off this market for the time being and prices are settling. This material is relatively rare, has a solid numismatic history, but the "speculator" has left the market and taken some of the "hot" money with him. The reason this market has shown such steady gains over the last 8 years is that such quality material is rare, so any real money attention can push price levels higher on a regular basis but, like in stocks and real estate, extended gains may lead to market consolidation. I do not suggest you avoid expensive rare coins for like ocean real estate they will always be expensive and intoxicating. But these amazing examples should go into "strong and educated hands" capable of understanding price swings. I also note a comment by a well-respected high end dealer on "retreads". A retread in the coin business is an insider's term referring to coins which simply move from show to show and thus becomes stale inventory which has been seen again and again but does not sell. This dealer makes the point that prices move lower on this type of high grade material because what is left in the marketplace are mainly rejects and so must be discounted to sell. The well-taken point is simply that prices in the higher end can move lower because of an absence of "fresh" material. A famous rare coin newsletter writer sees a growing spread between traditional wholesale value and the auction record if the coin example falls in the lower end of the spectrum. To rephrase this sentiment the expensive coin will bring all the money if it is perfect for the grade. And in this market perfect means perfect or in other words no physical distractions. This is an important distinction because in a hot rare coin market there is much more latitude simply because there are not enough examples to go around. The May 1, 2009 Gray Sheet states this concept nicely: "In particular, coins with rarity and low populations, that are problem free, fresh, all there for the grade, have no distraction, tell an interesting story or have a good pedigree are highly sought after." So where does this all put us when considering the rare coin investment market in general? For the traditional slower summer months I think things will continue to trade at a lower energy level driven more by real interest in the coins themselves, and not their ability to act as store of value in a stressed financial world. Also the dramatic decrease in credit card use by Americans, an economy which continues to slow, and increased unemployment cannot be helpful. The summer months are getting closer and traditionally this has been a slow time for the numismatic market. The positives for certified rare coins are many and include the unknown inflation consequences already built into the system and how the advanced rare coin buyer sees our national recovery. Educated folks who have purchased expensive rare coins are not your average worker, and therefore can better withstand a financial hurricane. They may leave the market from time to time, but they tend to return looking for bargains. Remember that many of the great rare coins do not come up for sale very often, so when they do they also bring the "sizzle" with them and prices act accordingly. Also of tremendous importance in today's rare coin market is the sometimes overlooked but huge presence created by the internet. This cannot be overstated because the smaller rare coin market of years ago is gone forever. An unknown professional businessman can with a click of a mouse purchase a PCGS MS 63 1796 Small Eagle quarter for $150,000 in Hong Kong and then go back to smoking his Cuban cigar. It happens more than you can imagine.2. And what is happening to gold? Since 2007 gold has tried to break above the $1000 mark on three separate occasions and failed, but if you go back to 2005 the king of precious metals has more than doubled in value. Now that is incredible when compared to anything else in that time frame especially in light of a collapsing real estate market, a banking system on the verge of collapse and in dire need of government help, and a fall in stock prices compared to The Great Depression. But for some reason, the minute gold consolidates everyone calls an end to the bull market. The recession began in late 2007 and, according to a Pole I just read, the vast majority of Americans do not represent themselves as Republicans. Now I'm not going to get political, but this recession has cost more than 5 million jobs and with GM and Chrysler on the ropes it also puts almost a million auto workers pensions into question. But here is where this train goes off the tracks. With consumer opinion polls improving many Americas think the worst is over! And Wall Street is talking about reinvesting in the DOW now that things have settled down. Maybe I missed something, but the only good news in housing was that the declines have slowed, and while the DOW has staged a rally reclaiming the 8000 mark it may be a bit soon to bring out the champagne. And remember the current 5 million person job loss will contribute to an entire new round of real estate defaults which have little to do with the still unfolding sub-prime mess. Also consider that the US economy has contracted more than 11% in the last two quarters with no gains in sight, so everyone is celebrating a contraction rate that is slowing. As of May 2009 the Fed has closed 33 banks, and because this banking stuff is secret the folks who really need the information are out in the cold. Finally, just how long will it take before the first spending scandal hits the papers and the US taxpayer begins to wonder if it really is his job to take care of everyone? America will soon notice that our 10-year spending binge followed by stock and real estate losses in the trillions of dollars cannot be reversed in a short year of government bailouts and television feel good talk. There has to be more pain involved, or every government in the world would embrace this type of imaginary wealth creation and socialistic intervention in free enterprise. Money supply numbers have been going up for years, but of late the graph shows staggering growth as President Obama and the Congress struggle with keeping the economic balance in some of America's largest institutions. The "right" or "wrong" of this I will leave to the history books but like my mother used to say "Someone has to pay". So into this economic minced pie let's add the inevitable tax increases, and if you believe only the rich will be fleeced you are mistaken. These massive spending programs will require everyone to pony-up so hold onto your wallets, expect tax increases across the board, and look for the Presidential rating to fall accordingly. Contrary to common beliefs the government cannot just print more money without inflationary consequences. Just how long is difficult to judge, but with the explosion in spending I can't believe we are talking about more than a year or two. It appears that the government can suspend laws of monetary physics in the short term, but they cannot get away with such slight of hand forever. Even the Chinese, who hold trillions of dollars worth of US debt, are worried enough to be talking about the end of US dollar dominance in world trade, and have secretly increased their gold holdings more than 600 tons since 2003. I have a friend who visits the store on a regular basis who is the most ardent chart watcher I have ever known. He has his original precious metals charts with hand notes saved from the 1970's! At any rate he is true believer and an expert in technical analysis including wave theory, and he claims today's gold market closely mirrors that of the great market moves of the late 1970's. By his second cup of coffee I was ready to increase my gold bullion position again, as he believes this market may double in the next 18 months! Granted he has always been a gold bull, but chart similarities between bull markets are encouraging even to trade folks like me. Over the next few years look for gold to be in, out and in again as a dyslexic public hopes for the best, but prepares for the worst round of monetary inflation we have ever experienced in the country. Gold will continue its upward movement with the usual setbacks, as governments of the world declare that the emergency has passed and everything is back to normal. Don't you believe it my reading friends, and don't miss the opportunity to increase your precious metals holdings on any pullback opportunities. Over the next decade today's prices will look like a bargain as the US dollar continues to tank, and your Uncle Sam continues to promise more goodies including comprehensive health coverage and protection against systemic business failures while creating a new type of capitalism that rewards without exception.3. I have never been a big fan of precious metals in your IRA. What you really want in your IRA are interest-bearing products because the power of compounding interest over your lifetime cannot be denied. That, my friends, is a very difficult deal to beat, but let's say you are an unabashed gold bug and just have to put real gold in your retirement plan. Well then let's make sure you are not being led down the garden path. A logical bullion choice is the US Gold Eagle so you ask your broker for advice: "Actually your best choice is the US Gold Eagle in Proof, they are much rarer". You make the classic mistake of not figuring the cost per ounce, and so are robbed in the following way: On the Eagle bullion coin the dealer makes a fair $20 per ounce but the proof, on the other hand, sells for much more and an unscrupulous dealer can pocket $500 on each coin which guarantees this IRA investment is a loser. So the rule here is to avoid Proof Gold Eagles in your IRA and stick with plain bullion coins. 4. Finally there seems to be a widening of prices between the Blue Sheet and the Grey Sheet. This is not unusual, as the Grey Sheet represents dealer bids for "sighted material", in other words the dealer gets to examine the coin and decide if the example is good enough for his bid. The Blue Sheet generally represents the "blind market", which means dealer bids are cheaper and therefore relative quality takes a back seat to price. Please don't email me and ask why all examples within the same PCGS grade are not similarly priced, as you should know by now or should not be investing in rare coins. At any rate this difference in price between Grey and Blue Sheets is very apparent in MS 65 Morgan Dollars, and should be a signal to the informed buyer that this could lead to a serious pricing problem. Professionals now parse the high and low end coming up with something in between, but if this difference is large the entire market fails the value test and should be avoided unless the new buyer is very competent. 5. After some commentary on coin prices at Central States I now share auction price information from the May 11, 2009 Coin World which is illustrative of the higher end coin market. The title High-End Coin Prices Fall is a good place to begin. The examples I use leave out many details because I want to be clear about making an investment point: A coin which just traded at auction for $63,250 and which fetched $126,500 using the same auction format in 2007, another brought $48,875 and the consignor bought at auction for $138,000 in 2007. There were other examples but I want to cut to the chase as the article finishes: "Some coins held their value throughout multiple auction appearances, and a few even went up in price. However, the dominant trend at auction was that expensive coins sold for less than their acquisition price when previously sold at public auction". Now don't get me wrong as I have nothing against auction companies and commend them for selling many truly great collections in my career. But I would suggest a more careful approach unless you are well schooled and experienced. Reading a few books and comparing auction prices is not good enough when entering the area of expensive rare coins. Feb 2 - May 1, 2009 1. Throughout most of 2008 gold has moved
sideways between roughly $700 and $1000 an ounce. This almost predictable
pattern should be seen as yet another chance to buy those bullion coins or
bars needed to protect your financial ship in a stormy sea. I believe we are
in the middle of great wealth redistribution in the United States, and with
money supply figures exploding the folks who own gold and silver bullion
will be in a better position to weather this storm. Stick with lower premium
hallmarked products and develop a plan to purchase on a regular basis. This
systematic approach will reduce natural market volatility and give you a
chance to become familiar with the process. While using this approach ask
your dealer about his “buy” and “sell” prices and the process involved when
selling product back to him. Is cash available when you want to sell? There
are a few bullion products which are reportable but most are not and knowing
the difference will save you time and trouble. These are important
questions, so if you get the runaround find someone who can answer them
honestly. Dec 1 - Jan 30, 2009 1. As 2008 draws to a close it is always
nice to look back with a small smile even if you were on the wrong side of
the market more than you would have preferred. The credit crisis created the
deflation in prices which is seen virtually everywhere today.
This caught everyone by surprise so be careful if a pundit claims he saw it
coming. Believe me, no commenter saw this financial mess in the tea leafs.
Sept 16 - Nov 28, 2008 1. Well these past few weeks have scared everyone holding precious metals and left most large dealers scratching their heads. How can the gold look at $1000 an ounce, with expectations of $1300, and then fall off the cliff into the $700’s while at the same time there are shortages in most major bullion coins? Silver ran the same gauntlet, looking very convincing in the $18 to $21 range and then heading south by half! And in silver’s case there was an even bigger disconnect in the physical market as virtually everything was unavailable including all those silver bars we sold in the last two decades?
Has the usual law of supply and demand been turned on its head? In my 30 years of experience as gold and silver move higher the public would normally take profits and our bullion inventories would move higher.
You might say that everyone thought the precious metals market was just warming up and they were too bullish to sell. For the sake of discussion let’s assume that was true.
Then when the market tanked dealers should have seen private investor holdings being sold and dealer inventories moving higher. What really happened was equally puzzling in that private investors did not sell and dealer inventories remained low. Now don’t get me wrong a few folks sold and ran for the hills. But believe me very few relative to the millions of dollars in precious metals sold over the last few years.
And what about the real shortages in physical bullion folks have been talking about for some time? The US Mint can’t produce enough gold or silver Eagles and we are still backordered on JM 100 ounce silver bars. The bar situation is so bad we now believe JM production capacity may be damaged beyond repair and are looking to the private market for another quality 100 ounce silver bar. You could make the case that during these turbulent times there has been other forms of silver bullion available, like 90% silver bags and Comex bars, and you would be right most of the time. But I have never seen premiums so high on gold or silver Eagles and still nothing in sight.
O.K., here is the conspiracy theory once again unveiled. Paper players and powerful leverage caused the latest move lower in the metals. Years ago I would have been the first to discount this as a plausible reason for weaker precious metals prices but the recent work done by Ted Butler, David Morgan, and Jason Homel have given me pause and caused old time physical players to wonder if these folks are on to something. If large paper short positions can cause dramatic and unfounded change in the future market, which is a story that has been whispered in the trade for years, then the real question is how long can this paper storm cause a decrease in the price of the real physical product?
Now don’t get me wrong, this argument of paper manipulation has been used to explain price weakness in the metals many times over the past 30 years. In fact, old time dealers considered this almost montra like chant a handy way of explaining a drop in prices because conspiracy theories play will with the investing public. But this time around may be different. Why? Because the other times this card was played there was plenty of physical product in plain sight. This is the only time I can remember when physical product was not handily available and prices went down anyway. Now don’t email with the usual there is plenty around but the manufacturing capabilities are too limited and once that is corrected there will be plenty for everyone. I wonder if this time the truth really is that people are considering the precious metals more like real money than an investment relative to the number of dollars it will bring on any given day.
In the meantime problems abound with the federal bailout of mortgage giants Fannie Mae and Freddie Mac which is sure to trickle down to every corner of the real estate market. And Uncle Sam is there to hand out money to troubled Bear Stearns, Goldman Sachs, and Morgan Stanley in an attempt to once again shore up Wall Street and the resultant American faith in these paper giants.
If that was not enough Lehman Brothers files on September 15 and Bank of America takes over Merril. Further proof the financial markets are far from settled so don’t be fooled with the latest government pronouncement that the worst is over and now we can get back to business. It will take years for these imbalances to work themselves out of Wall Street and the economy not months.
These types of Government help packages are well documented and talked about all over the news so the public is informed but as bad as this intervention is for the average Joe, all of the above pails in comparison to the well-hidden derivative market. This, my reading friends, is the Black Hole of Finance, not only for Wall Street but for the entire world. Why? Because even smart guys can’t quite define just how much risk is involved in this probability game and therefore how much money is at risk for everyone.
Will all of these destabilizing issues alone cause gold to move back to the vaulted $1000 mark? Probably not but it will help as more investors seek a “safe haven”. Gold bullion has always been attractive to those with little patience or faith in the notion that our government will eventually do the right thing. And the great thing about gold and silver bullion is that your physical possession protects you and the family. Which brings me to another point about dealers offering delayed delivery…be careful because the whole idea behind precious metals is that you want the product in your own hands. Any delay, out side of normal clearing process should be considered a negative. Paying up front for 100 ounce silver bars with an expected delivery date of 3 or 4 months in the future makes no sense to me when you could purchase the same silver in 90% silver bags and take delivery today.
So will all of these financial problems help collapse the US financial structure? Of course not, the US financial system is so broad and deep that it can take a drubbing and still continue to poke along…much the same way as the Japanese banking and manufacturing systems have done after the financial ruin visited on it by impudent lending. It did not collapse, but its annual growth was hampered for years as the Japanese government hawked future dollar profits instead of writing off bad debts which have been on the books for decades.
What cost to the taxpayer? Between the sub-prime debacle and government bailouts of companies which should be left to answer for their mismanagement the cost will be in the trillions. There is no government intervention which does not carry serious consequences for the American taxpayer. You won’t see or feel such intervention for years but that is the great secret most politicians exploit. And please don’t email for bashing politicians with a secret agenda. Most of them are good folks, and believe they are working for the greater good. That is just what makes the whole situation unbelievably bad, for they just don’t get the soundly democratic idea that less government is better government.
So what does this all have to do with the price of gold? It really takes no talent to see that the price of gold is linked to the dollar, oil, and inflation. Any insider will admit the dollar is doomed over the longer term because of the above problems. These are systemic in nature and no elected party can do much with debt which has been institutionalized for years. The dollar will go through its normal up and down cycle relative to other currencies and on the up cycle gold will sell off, but don’t be fooled, over the long term the dollar will only make lower highs and lower lows.
The price of oil is already outrageous and I believe the only reason everyone is breathing easier is because they expected $200 oil and where given $100 instead. The No SUV talk stopped overnight and what happened to all of those Green Commercials? Do you really think the American public or Detroit learned anything from the threat of $200 oil? Believe me $100 oil is half as dangerous as $200 oil but the lower number is still highly inflationary and experts believe the era of cheap oil is over forever. It is not if oil will double in price, only when this event will rock the international world of finance. Why? The capacity to pump oil out of the ground is decreasing and demand from developing nations like China and India will not be denied in the longer term.
Finally the inflation genie has to be paid for the most recent surge in price of oil and inflationary government programs which the working folk are not only expected to pay for but be happy because Uncle is not asking for more installments.
My best advice is to look at this across the board pullback as a way of enriching yourself because everything is now on sale. In 2000 the price of gold was about $300 and this 8 year bull market saw gold hit $1000. All the positive fundamentals you considered over that 8 year bull-run are still in place and in fact the world financial situation is worse. I purchased for my personal account once the slid started and continued a step down process for the past month…it is my intention to follow this market down because I really feel the inevitable rebound will catch everyone by surprise and over the next decade this price weakness will be seen as the best buying opportunities offered in the last 15 years.
Peak Gold Close $1004.00 3/18/08 Discount 26.2% Low Gold Close $ 741.30 9/16/08
Peak Silver Close $ 20.34 3/1308 Discount 48.5% Low Silver Close $ 10.49 9/16/08
Peak Platinum Close $2087.00 3/13/08 Discount 44.5% Low Platinum Close $1160.00 9/16/08
Peak Palladium Close $ 513.00 3/13/08 Discount 53.5% Low Palladium Close $ 239.00 6/16/08
2. In my last comments I wondered where all the 100 ounce bars we sold, over the past 30 years, have gone? Could it be that the 100 ounce, the 10 ounce, and the 1 ounce silver bar have really disappeared into “strong hands” and the well-known manufactures simply cannot keep pace with current demand? Or is there another sinister dynamic worth your consideration? I have waited patiently for the so-called big boys to produce enough smaller silver bars to quell demand and in the process have sold other low premium silver bullion products like 1000 ounce Comex bars and $1000 face 90% silver bags. But still the investing public deserves an answer as to why some common bullion products have simply disappeared. Could the reason be that major distributors are making more money than they ever dreamed selling silver bullion products like US Silver Eagles, Canadian and Austrian Silver One Ounce coins at $3 and $4 premiums over spot when they were lucky to get half that much when the more common 100, 10, and 1 ounce generic silver bullion products were available? Your local dealer is not putting these big premiums in his pocket, they are just reflecting increased source cost from the various mints. But someone is making a fortune in this bullish silver market selling high premium silver bullion to the masses. The answer to this question may lie in the proprietary distribution from the various mints and the resultant conflict of interest in the distribution of 100 ounce silver bars. The next time you consider buying silver bullion look carefully at the premium you are paying and choose the lowest premium product relative to your needs. Over time it could mean a difference of 10% in the actual number of silver ounces you own and when things slow down you may not be able to recoup the high premiums which are now commonplace for US Silver Eagles, Canadian Silver Maple Leafs, and Australian 1 Ounce silver coins. So am I saying that US Silver Eagles at $4 over spot is a bad deal? Well it depends on silver bullion availability. If there are no other choices then you have to pay what you have to pay. But if there are lower premium choices it is worth the consideration. Thanks for reading.
3. My emails are back to this question: "Just how high can the precious metals climb in this financial environment?" Actually I hate this approach because it reminds me of the old snake oil traveling shows and every newbie to this business turns into a chicken-little with a crazy opinion. The truth is that any estimation is pure guesswork because no person knows the depth of the actual problem, but there is a site which may prove interesting for those of you who like numbers: Take a look at John Williams Shadow Government Statistics at http://www.shadowstats.com and his CPI Calculator (Inflation Calculator) will give you a great feel for relative value. In this example let’s make the year 1980 and the price of gold $850 and the price of silver $50. I appreciate these numbers are not exact but 1980, like today, was a time of extreme financial pressure and investors looked to the precious metals for monetary protection. This example will give you a good idea of how simple his CPI Calculator is and you can use any number or year you fancy.
Plug in the price for gold at $850 in 1980 and figure for inflation through Sept of 2008 and an equivalent price for gold is $2235.71!
Plug in the price for silver at $50 in 1980 and figure for inflation through Sept of 2008 and an equivalent price for silver is $131.51!
Now what does all this prove? Not much really because it is difficult to compare 1980 to 2008 but there are some similarities and if you think you have missed this bull market in precious metals, the truth is that we have a long way to go. Just how high the new benchmark will become is impossible to say because, like I said, even the smart guys don't know the extent of this credit problem.
July 1 - Sept 15, 2008
1. What will gold do on the short to medium term? This is an often
received email and one that is difficult to answer because there are few, if
any folks who can offer more than a guess. That being said gold looks like it
wants to “channel” for awhile as it saw recent lows in May of
2008 of $840 and recent highs of $940 in July. So consider $840 the bottom of
the channel and $940 the top, with gold moving back and forth trying to
decide what to do on the shorter term. I believe this channel is the result
of no one believing the wild claims now being made about the price of oil.
Why? Because higher oil prices will moderate consumer demand and prices will
eventually fall. This will of course help consumers and keep gold within its
current channel. We don’t need the usual hot-air from
Look at the longer term and you will see gold broke above the $440 mark on
September 12, 2005 and with its usual up and down movement topped $1000 on
March 17 of 2008. Why? Forget all the rhetoric and remember this move was
simply a reaction to inflation that was hidden at the time but is now being
measured on everyone’s balance sheet. This metal has been telling us
for sometime now that there is something wrong with government inflation
numbers and cost of living not only in
While gold continues to channel our government continues to print and spend money at an alarming rate. It should be obvious to everyone that we are simply building in another round of world inflation. And the results of the virtual doubling of the price of oil continue to be spoon fed into economies of the world. If you look carefully at published inflation numbers you still will not see much action because like before the numbers are hidden. Such financial slight of hand will eventually be reflected in the price of gold and that is a certainty, so the only real question is simply will you have taken advantage of channeling prices to increase your holdings or will you pay whatever is necessary to avoid the financial hurricane on the horizon?
2. Where do I keep my investments? This is also a common question and one that needs special attention because there are hundreds of wrong answers. Because of the extreme value of all hard assets I suggest that home storage is always a bad idea. It is too dangerous and here is a little inside secret: Even professionals use the banks. Now please don’t email me with all the admonitions about bank failure. The entire banking system was just fine through the Great Depression so I will use that track record as opposed to hiding a safe in the garage, thank you very much.
3. So are you a collector or investor? Your answer will provide valuable investment insight and help you avoid common mistakes made in this industry. But first let’s look at some pretty famous dealers, all of which I know personally and all of which are collectors at heart. But more importantly, they also collect something that will in no way change or improve their bottom line. In other words, a portion of their collecting needs are done just for fun. Dave Bowers, one of the most prolific numismatic writers of all time and long term world class dealer, collects, among other things, tokens. Now most tokens are not particularly valuable but they are neat in that they tell a great story. They belong to the very broad numismatic category known as exonumia but from a dollar standpoint make up only a small part of this industry. My friend David Hall, another world class player in this business and founder of PCGS (The Professional Coin Grading Service) has an intense interest in early rock and roll records. I find fascinating and collect late 19th century coin banks which were produced by the retooled factories which supplied weapons for the American civil war.
In fact I believe most larger than life coin dealers collect something besides coins for personal interest. Why? The common trait of collecting is what provided the foundation of most coin careers. By now you should be asking: “What does this have to do with my investments?” Believe it or not a little bit of this collecting interest will greatly enhance your investment experience and could just add a large number to your bottom line.
Now today, the pure collector is getting harder to find but they are readily identified because they are usually an expert and want, above all, to exchange information. The value of the coin in question is not unimportant to collectors but it does take a back seat to all the other factors which make coins interesting.
A pure investor, on the other hand, is more interested in cost and whether the coin produced a good return over the years. Most astute buyers today combine the good qualities of a collector and the monetary instincts of an investor and the result seems to work well. If you are too money motivated it has been my experience that you might make decisions which over the long term are not in your best interest.
Let’s use me as an example so I don’t completely alienate the pure investor. I have a coin collection and if you ask me the value of my collection could double or triple in the next 10 years. But even if it did, would I sell the collection and move back into paper money? Probably not because I enjoy the collection and its relative monetary value, while important is not the primary reason I have the collection. It was also an intellectual journey and has provided many hours of entertainment. Now remember my first assumption? That my collection would increase in value over the years? Well, suppose I am wrong and in fact it decreased over the same time period? Would I sell the collection with the admonition that buying hard assets was a waste of time and money? I can assure you I would not sell because there have been periods when coins decreased in value and I only added to my holdings. Actually I am less likely to sell my collection over time because I become more attached to it and the stories these coins convey. So would I have been better off financially if I had bought and sold this collection using a relative cost basis? In other words, forgot about collecting and acted purely like an investor? Actually my coin holdings have worked much like my real estate holdings. The property I bought and held has always outperformed the property I bought and sold using any relative valuation. My rather long point is my interest in collecting has always kept me from selling unless it was absolutely necessary. Over the very long term this approach has also paid me very handsome profits. Consider the collector in you from time to time and this insight might lead to a more informed decision. Thanks for reading and good luck.
4. What is the Coffee Pot Factor? O.K., as long as I'm offering an opinion on the short term direction of the gold market I might as well let you in on some inside information. The folks that visit us in person know we provide the best cup of coffee in L.A. and have for almost 30 years. In the old days the brand was Folger's and the cups were styrene but my daughter changed all that when she finished graduate school. Now we serve organic coffee in paper cups only...you guessed it...her contribution to a greener CNI. So what does this have to do with your investments? For as long back as I can remember, if we brew more than 3 pots of fresh coffee before noon the markets are moving forward on the short term. This morning (Monday July 14th) I just made my third pot for the first time in years before lunch. Just a word to the wise for those of you still sitting on the fence. March 31 - June 30, 2008 1. We are finally seeing the dreaded
pull back in gold which is something to embrace simply because a longer term
base is being built, but for some reason pours cold water on daily sales. So
rather than depend on how many times the phone rings I actually talked with
Ed Hom our Controller and asked for comparative month to month sales figures
for the past 12 months. To my amazement sales were only down about 10% so
maybe the public is in fact buying on weakness…what a novel idea. Of
course I’m joking somewhat but my usual and pretty boring position has
always been to simply make hard assets a part of the total investment
approach and you will do just fine over the long term. Have I lost faith in 2. Let me also offer a little honest
direction to those who have asked. I get questions on exactly what to invest
in virtually every week. The real answer to this question has more to do with
your personality than it does the general market or a specific item. Some
folks are plain bullion buyers and don't have the time or inclination to
learn about rare coins. In my 30 years experience I would say that about half
of the people we do business with fall into this group. Some investors, let's
say another 30% to get this point across, have a core bullion position and
PCGS graded rare coins. The 20% remaining are full fledged believers and
consider bullion only when they can't find the particular rare coin. So who
is right? If you talk to most numismatic dealers they will always point you
in the direction of rare coins because that is their business. Let's face it,
asking a rare coin dealer if you should buy a rare coin is like visiting a
car dealer and asking what he thinks of what your driving. Now for fairness
sake, there are many ethical and hardworking rare coin dealers. But there are
some firms with a national base that simply slam the investor with silly
prices and take advantage of their inexperience. So what is the right choice?
Like I said, it depends on your personality. If you are patient and don't
expect rare coin prices to move daily then a careful accumulation of PCGS
graded rare coins will provide inflation protection and over the long term
may produce a great profit. If you are the type that wants to calculate daily
profit or loss then bullion is a faster price track and may be your best
choice, but keep in mind it can be volatile. Personally I have always had a
combination of the two, but I also watch the History Channel and think
nothing about going to bed early with the latest mystery novel. My point
being that the choice is up to you and how you are wired. The overriding and
important financial conclusion is to do something to move a portion of your
dollar denominated saving into hard assets while there is still time. Hope
this helps and thanks for reading. Jan 2 - March 28, 2008 So Where Is Gold Going In 2008? 1. So where is gold going in 2008? Ah, the perennial question and I’m afraid my answer is the same as always. Gold is moving higher but before we get into some factors that are not so obvious, let's look at what gold and silver have done over the last few years: The Rising Tide In Metals Extends Itself Again In 2007 2001 GOLD SPOT $278.70 2002 $347.60 24.7% GAIN FOR 2002 2003 $415.00 19.3% GAIN FOR 2003 2004 $437.00 5.3% GAIN FOR 2004 2005 $517.00 18.3% GAIN FOR 2005 2006 $635.00 22.8% GAIN FOR 2006 2007 $835.00 31.4% GAIN FOR 2007 Overall Advance Of Gold Over 6 Years Is 199% 2001 Silver Spot $ 4.58 2002 $ 4.81 5.6% GAIN FOR 2002 2003 $ 5.45 22.9% GAIN FOR 2003 2004 $ 6.81 14.4% GAIN FOR 2004 2005 $ 8.82 29.5% GAIN FOR 2005 2006 $12.91 46.3% GAIN FOR 2006 2007 $14.84 14.9% GAIN FOR 2007 Overall Advance Of Silver Over 6 Years Is 224% Just looking at the trends above should convince most that the precious metals over the long term have been a good bet and may continue higher given today’s weaker currencies. The point I want to make however is that in each of those 6 years the public was suspect and believed gold was "too high". What did they expect? A correction that would provide a better deal if they waited. The trends which have caused these higher prices are obvious and there are plenty of online sources which detail dollar weakness, inflation, social unrest, and higher oil. But there are forces at work here that are not so obvious, very powerful, and could very well push gold into the $2000 to $3000 area as the general public is waiting for a better deal. I would have laughed at such talk just 5 years ago, but today this scenario seems more and more likely. Consider the following as you decide how much money you want to invest and more important what level you consider a good deal:
This question of how high gold will go has been with us for the last 30 years and it is always difficult to figure. Just for fun however I went back and looked at what I have done at various levels in this developing market.
I purchased less gold bullion when the prices moved below $300 per ounce and bought more $20 Saint Gaudens and Liberties when the price crossed over $400 per ounce. Which reminds me of a recent email in which an intelligent customer laments his purchase of $20’s over traditional bullion. He was right in that for the short term we both would have made more money buying gold Eagles over twenties. I suggested that he might consider rebalancing his position but would never do such a thing myself. I believe everyone should diversify their gold bullion position especially if they are concerned with the confiscation issue. For regular readers you already know that I place little stock in the notion that the government may confiscate gold, but it's like spilled salt with me, I don’t want to take any changes. At any rate, I purchased virtually no gold bullion in the $500 to $600 range, not because I stopped liking the market but because my daughter was getting married. I began buying bullion again as this market moved past $700 and am comfortable in today’s range. Was I right all the time? Of course not but I always had an increasing position over the years and can say the added financial insurance made me feel comfortable. That is what gold has always represented to me, and why daily up or down moves are not of any concern. Gold ownership is not necessarily a quick way to get rich, although that might eventually be an added benefit. It is instead a kind of absolute insurance policy, which like your other insurance policies is there if you really need the help.
2. O.K. for all you book fans out there I have finished two new books that were definitely worth the time and energy: The first is a must read if you are interested in extremely rare gold pieces with killer stories to boot. This book was written by Alison Frankel and is called Double Eagle, The Epic Story of the World’s Most Valuable Coin (2006). It is the in depth story of the 1933 $20 Saint Gaudens which for years was fabled to exist but never traded hands because US sanctions kept it off the market. A great read with insider quotes which does a wonderful job at creating just what happened and why. The second book is completely different from anything I have read but for some reason seems to attract folks in the precious metals business. It is written by J.J. Luna and is called How To Be Invisible, The Essential Guide to Protecting Your Personal Privacy, Your Assets, and Your Life (2004). This would not be a book that would ordinarily attract someone like me but when I began reading it I was hard pressed to lay it down. The writing may seem a bit paranoid for the average fellow but then I’m sure it does not go far enough for those with a bunker mentality. At any rate, I'm always asked what I'm reading these days, so take a look if stuff like this appeals to you and email me with your comments. Sept 3 - Dec 31, 2007 1. So where are we after the recent Long Beach Show and the first real sell off in gold since the new challenge to the $700 level? And then we see gold reverse itself and move into the $750 area so now everyone is really confused. The coin dealers at the show which were able to fill a portion of their want lists were happy because this type of wholesale buying turns into an instant sale when they get back home. “Want Lists” are a powerful price mover in the rare coin business. Other dealers commented that the show did not seem to have the “punch” given the recent surge in gold. For old timers in this business this is the usual Catch-22, in that if gold pre-show was weaker, their expectation would not have risen and when asked about the Long Beach Show they would have been more than satisfied considering the weakness. In other words they had little expectation of a good show and therefore a flat outcome seemed like a good deal. Still other dealers are complaining that there is not enough really nice material to go around and would be willing to “pay more” for the right stuff. This latter group is looking for “fresh” material, meaning it has not been in dealer’s inventory for long. They are willing to push prices higher to get those “special” coins because there is plenty of "cash" sitting on the sidelines waiting for the right coin to come along.
The show was optimistic if the dealer was optimistic and cautious for those
thinking prices may pull back if gold does not follow through. So are the
results of such a large show as
It is true that gold is in the process of making all time new highs. But as I have said before this process will be long and drawn out regardless of dollar weakness. In the next 10 years you could have a totally new world market in currency which considers the dollar just another piece to the puzzle. In other words the past dominance the dollar has enjoyed in international trade may well be a thing of the past. This, of course, will be providential for gold and could very well mean we are looking at $2000 even $3000 an ounce. I know that sounds crazy and 10 years ago I would be first in line to say so, but today, with a world which has truly lost its way I may be conservative. The point being that if you have been watching and believe you missed the boat you are wrong. This is not the end to a bull move but the beginning of fundamental shift in the price of gold.
But let me make an important point when you are deciding where to place your extra investment money: I have Krugerrands I purchased in 1980 at the height of the old gold market. They are still part of my investment strategy but if you singled out that investment it looks pretty bad relative to what I could have done with the money. I also have gold sets, commemoratives, and silver dollars, all of which have surged and fallen back in price many times in my career. My type collection and early gold coins have done well but I have held them for more than 20 years.
So what can we learn from this type of information? If you are the type of person who looks at precious metals and rare coins relative to the amount of interest you could have gotten in the same time period you will be happy or you will be sad depending on the short term direction of the market. After all it is difficult to compete with compound interest and frankly some people should not because their temperament is not right for a hard asset market which moves up and down relative to interest rates, the price of oil, dollar weakness and a host of other complex financial pressures. I on the other hand look at the precious metals and rare coins which I personally own as a great insurance policy against a world which is increasingly difficult to figure and could come crashing down on everyone’s plans. Do I think this melt-down scenario will really happen? Probably not, but at my age I don’t want to bet the farm on any politician, Democrat or Republican. So I incorporate an armageddon investment plan and hope I will never need it. The core of this approach buys precious metals and certified rare coins over the long term and places them in a safe place. Will this treasure increase in value? Probably so and I certainly hope it does but even if this type of hard asset does move higher, my probability of selling is not good because I don’t want to loose my anchor. Maybe I will sell when I retire, but then maybe I will give my children something that is really valuable.
2. I see that the extremely high end market continues to show strength even though some experts believe a rest may be in order. According to the October 22, 2007 Coin World a Proof 1804 $10 sells for a record $5 million. The proof 1838 Coronet Eagle sells for $1.7 million in the same deal! These type of rare coins are, of course, not your normal fair and obviously not for everyone. There is however a growing number of well healed investors which choose very expensive rare coins because they can and because they represent an elite group of people parking extra money in an area they consider cheap. Those with years of experience certainly would not make the case that this area is cheap, but relative to say the art market a solid case could be made. These "super coins" are usually well documented and have what is known in the trade as "providence", meaning they carry a long history of being included in the world's most famous collections. Like I said there is an ocean of money floating around and as that ocean becomes deeper look for further world records.
3. The Holiday Season is fast approaching, so here is the CNI schedule: For Thanksgiving which falls, of course, on a Thursday, we will close Nov 22-Thursday and Nov 23- Friday. Christmas falls on a Tuesday, so we will close Dec 24-Monday, Dec 25-Tuesday and Dec 26-Wednesday. For the New Year we will close Dec 31-Monday, Jan 1-Tuesday, and Jan 2-Wednesday. As we consider 2008, let me wish you all the best of God's blessings. July 2 - Aug 31, 2007 1. "Hey Richard, how come there aren't any new articles re: the coin biz lately? Surely there must've been something to have been learned from the Central show perhaps? What's your take, by the way, on the depreciating dollar - will the continuing trend in more interest in foreign currencies ultimately have a ripple effect and ultimately hurt the value of US rare coins, as well?" As usual Central States was an important show but in my opinion came out rather flat. That does not mean there was not action. As usual, hard to find rare coins with nice eye appeal sold well in most price ranges. Notice the phrase "nice eye appeal" which is so important in this market. In other words there is always an active market for carefully selected rare coins. Coins which are off for the grade are another matter. That is why it is so important when buying that your dealer uses a tough sight seen standard. Believe me the extra few bucks you pay is worth the price. Auction prices were sky-high and have been for past 5 years but even with these high prices there is not an abundance of nice material for sale. The bull market in rare coins in still alive and well but has shown some seasonal slow down. No dealer I talked to was giving anything away because most expect an active fall season. But many of them were bored. That being said there are a few distractions which must be considered. The first is the large amount of money which is not coming into the market because gold continues sideways. Now don't read that wrong, there are many seasoned newsletter writers (The Aden Sisters and others) who believe $2000 gold is a certainty, especially with higher oil prices. But waiting for gold to climb over this forward resistance is aggravating to many first time buyers or players who want to see price action on the short term. The dollar index is as low as I can remember which means everyone should be buying gold with both hands. This market is offering yet another opportunity to accumulate long term positions. The other distraction is bad for the short term but will probably turn out to be good news over the longer term. There is a large amount of investment money going into the certified bullion market. This is a new phenomenon and its long term effect will be difficult to figure. I believe most folks who pay large premiums for these common bullion coins will eventually find they could have placed their money in a better place. But there is no doubt that this money, so placed, is not going into the traditional PCGS certified rare coin market. Does it make much difference in the short term? It might with gold moving sideways, thus my comment about Central States being flat. There is also the "summer factor" which is a traditionally slow time for the coin business in general. Many old time dealers simply closed down during these summer months and took the family on vacation. But the overall collector market for rare coins of virtually any stripe is not only solid, it is growing and accelerating. A prime example of this is the US Mint's 2 hour sellout of the First Spouse series. I appreciate that these 1/2 ounce gold coins fall more into the bullion area than the rare coin area but the public bought 80,000 of them with the idea of collecting the series. This is strong by any standard and even caught the Mint off guard as quoted in the July 9, 2007 Coin World: "Demand for the First Spouse coins exceeded the United States Mint's most optimistic forecasts," Eskridge said. These new areas, including the States quarter program, the explosion of coin buying via the net, and other programs introduced over the last 5 years bring new coin buyers into the mix. Many of these players will get burned and never buy another coin, but many more will look deeper into an area which offers enormous potential. Especially as the dollar becomes weaker and more people realize the trap we Americans face as we continue to print currency by the truck full. This flight to quality has always been a great source of new coin buyers. It will no doubt produce more quality investors looking to hedge their dollars. This simply means that the fixed supply of legitimate PCGS graded rare coins must, ultimately be squeezed as more people want in on the action. As far as the depreciating dollar
is concerned there is no hope of a reversal and is yet another trend which
will push the precious metals and PCGS certified rare coins to higher levels.
I have said this for sometime and have taken some heat from the statement
because everyone wants to know when they will make a big score. It is
difficult to say but as sure as I'm getting older I believe the US dollar is
doomed because we can't get our priorities straight in As usual stick with my tried and true strategy of putting away your extra money in core bullion holdings, not to be sold unless you are desperate. Then consider carefully selected PCGS graded rare coins which are at least 50 years old. Stay away from those frenetic night callers offering the get rich quick scheme, use good pricing sense and take your time before you commit to any coin or bullion deal. Now mix the result with plenty of time and look at this investment approach as just another asset in your portfolio. Good luck and thanks for the question.
2. This just in from our friend's at ICTA (The Industry Council for Tangible Assets): COINS IN IRAs BILL INTRODUCED S.1533, "The Options for Investors through United States Certified Coins Act of 2007" was introduced by Senator David Vitter (R-LA) on May 25. This is the bill that would restore certified coins (subject to certain restrictions) as qualified investments for IRAs and other self-directed retirement accounts. The project's lobbyists will now work to get as many cosponsors as possible for this bill, identify legislation to which they can attach S. 1533, and move to the House of Representatives to seek the introduction of companion legislation. For a copy of the bill, go to www.thomas.loc.gov/ and enter the bill number." This is the kind of news that could move the PCGS certified rare coin market into its next bull phase. Everyone in the industry has talked about this piece of legislation as it was introduced and failed in a number of incarnations over the past 15 years. For some reason our government has been slow to OK this reasonable extension of personal control over retirement funds. This is curious because such legislation existed for rare coin investment in the past and most certainly will in the future. Make no mistake about how powerful such a move would be to overall PCGS prices. I expect this legislation will eventually pass so now is the time for careful accumulation of these underpriced coins. You probably heard it here first.
3. Just finished reading the July 27, 2007 edition of the Certified Coin Dealer Newsletter. Also known in the trade as the Blue Sheet this is an old industry pricing source which tends to show the lower range of prices for certified rare coins. I say lower range because the prices listed are "sight-unseen" meaning the posting dealer will pay the money regardless of what the coin looks like, so prices tend to be defensive. The price a dealer pays for a coin he really likes is called the "sight-seen" market and will always be higher because he must compete for material with nice eye appeal. The editorial portion of this
edition of the Blue Sheet was interesting, especially if you watch the higher
end of the market. A well known dealer has just sold the famous 1894-S Barber
Dime to an investment banker from April 2 - Jun 29, 2007 1. Not long ago I looked at old time collection which was not certified. I recommended that the owner not invest the extra money for certification because the coins were circulated and of lower grades. The thought here is that it does not make sense to spend several hundred dollars in certification costs when the total value of the collection was less than $1000.00. This "screening process" before submitting coins for certification can save you money and most professional dealers are glad to offer an opinion at no cost. If you are uncertain as to whether you are getting the straight story, just shop around and get another opinion. If that still does not satisfy your curiosity consider sending a few select coins to PCGS and "testing" the dealer's ability to grade the collection and give you an honest opinion about its value. Remember that just because your collection is not "high grade" it can still be valuable because there are thousands of collectors who specialize in early collector coins. Selling such a collection is never a problem for top Gray Sheet bid because of the wide collector base. The fellow that owned this collection was a great guy and just wanted to know he was getting fair value so after some explanation and examples he sold the collection and put the cash in his pocket. He then told me how the collection was assembled and produced a copy of the Chicago Tribune dated December 10, 1967. It had dozens of old coin offers and I was reminded of how everyone did business back in the old days. How about a circulated roll of Indian Head cents (that's 50 coins) for $9.95? Today most dealers would pay $50 or more for such a roll depending on condition. As I read the paper I commented on how cheap the coins were, which is always fun and serves to remind everyone how far the dollar has fallen in value. Then I saw something that made me laugh for he rest of the day. How many readers remember the SCAN-O-MATIC? This machine was all over the place at that time accompanied by a number of other "inventions" designed to help collectors look more carefully at pocket change. Most are gone today but early examples like this bring back many nostalgic moments when pocket change was looked at more carefully than it is today. Here is what the advertisement said: "Examine rolls of coins quickly and easily with this electric coin viewer. Coins are fed under a lighted 5-power magnifier, flipped over and ejected automatically. The perfect gift for any collector. $12.50"
2. Talking about old collections I have a suggestion for you "old-time" collectors. Actually I mention this a regular basis because these tips seems to be forgotten over time. Storage of rare coins is not difficult but it does require some knowledge. First, don't use any tape to seal up holders. This is commonly done on collections which walk into the store on a weekly basis. Tape contains a number of chemicals which over time can cause your treasure to deteriorate. It can take a perfectly good coin, worth sending to PCGS for certification and turn it into a "body bag". This is coin lingo for a coin sent to PCGS for grading but found to be have "environmental damage" or other problems which keeps the coin from being encapsulated. The coin comes back to the owner in a small plastic bag with the grader's opinion as to why to did not make it into a sealed PCGS holder. Second, if your coins are still in older soft plastic holders have them looked at by a professional, even if you do not plan to sell anything. In the 1970's the generally used plastic holder was made "softer" by adding PVC (Polyvinyl chloride) to the manufacturing mix. At the time everyone thought this was a great idea because it made the holder easier to handle. Over time, however, some coins began to chemically react to this additive resulting in damage to coins. PVC is still used in many holders today and the short term use of such holders is fine. But if you plan to store coins for a number of years you should avoid holders containing polyvinyl chloride. The hard plastic holders used to house graded PCGS coins contain no PVC and are the best on the market for long term storage. If you have questions about long term coin storage email me (RSchwary@aol.com) with the situation and I will give you an opinion.
3. How about this for a curious situation? One that may prove a good bet for gold bullion investors. As of August 2007 the Australian Mint will stop production of the popular 1 ounce Lunar Series. Now keep in mind this limited production series produced 12 coins, each of which was limited to 30,000 coins or less. What is interesting is the "or less" part of the equation. Now the Dragon, Horse and Snake have production levels of 30,000 coins, all are sold out and carry a substantial premium. As of August the other nine coins will no longer be available and mintages could be substantially less than their more expensive animal cousins. While we don't know any specific information, the best bet seems to be to purchase the remaining 9 bullion coins which still trade for a small premium. After the cut-off date you could well find out that this small premium bullion coin now has a smaller mintage than the more expensive earlier gold coins which have sold out! No promises here but if you are a gold bullion player and want an extra kick without paying much extra freight this could be right up your alley. We will keep you informed as to final mintage numbers but it does seem you can get something for almost nothing if you act soon.
4. This comment is actually not closely related to rare coins but I get this type of email on a regular basis and thought the answer might be interesting to a larger audience. The writer is concerned with buying 90% silver bags and may have been approached from a dealer asking a premium for his bags because their condition are "better" in some way that may bring more money when sold in the future. This tactic is used on a regular basis to get more money out of the investor while providing little real value. Don't laugh, circulated Walking Liberty half dollar bags are regularly sold to first time investors for up to twice as much on the pretense that the investor is buying something better.
Hi Jim, 1. All of our bags are sorted into $500 face value...meaning if you purchased "a bag" you would actually get two bags of $500 face each...they are much easier to lift and handle. Each unit contains all of one denomination...meaning you get either all dimes, all quarters, or all half dollars in each half bag. Silver dollars are not considered among 90% silver bags...they have always been worth a premium and are considered more of a collectable than a bullion product. Stay away from circulated dollars unless you are a coin collector. 2. The quality of all large bullion houses is uniform...in other words you receive average coins which were in circulation at the time. The notion of worn or slick coins affecting a bag is of no concern considering the volume of bags traded each day. If wear was a factor 90% silver bags would never be traded in the larger market...or if they were they would never be considered a bullion product and so the differnce between the buy and sell would be much larger. 3. Age also makes no difference as long as all the coins
were struck on or before 1964. You may get earlier coins in any random bag
but the value of these coins are the same. Dealers who make a distinction
between Walking Liberty coins or 4. Like I explained in (3) there idea of buying "more valuable" circulated silver coins is simply a way for the selling dealer to charge more for his bag. When you get ready to sell you will find that extra premium simply disappears or is so small as to make your original decision to pay more seem like you got taken in the first place. The reason for this is that these circulated silver coins were made in gigantic quantities and will never be rare in any sense. Investing in 90% silver coin bags is simply a good way to invest in silver bullion...it will never be anything more. Good luck. Richard Schwary www.golddealer.com 1-800-225-7531 Jan 2 - Mar 30, 2007 1.
The FUN Show (Florida United Numismatists) is over and reports coming in were
positive. The Grey Sheet headline: AUCTIONS HAMMER $85 MILLION IN
I could add a few more thoughts: First, many areas of the rare coin business are still under priced. I'm not including truly expensive coins which trade for say a few hundred thousand up to several million dollars. This area is difficult to figure but I can say that divining direction at these rarified levels is tough even for professionals. A million dollar rarity this year could just as easily be two million next year. Dealers call these extreme rarities "big boy coins" because their prices require a large bankroll and steady nerves. For the rest of us the coin business still abounds with issues which are historically interesting, rare, and affordable.
I
think it is also important to note that the price of oil will dictate
business activity to many dealers. If oil begins increasing again, gold will
follow and general prices levels in rare coins will follow. The
This
approach over the years has produced excellent results and I believe it will
continue to do so. If the markets look flat don't be too concerned and the
same advice goes for markets which look hot. Buy and hold for the long term
with the certain knowledge that in the short term anything is possible but in
the long term the dollar decline is inevitable. This dollar decline is the
key to rising prices in all hard assets. Good luck in 2007 and if you have
any specific questions email anytime (RSchwary@aol.com).
2.
The new dollar presidential series has begun with 2007 Washington Dollar.
This idea still remains unproven in that similar dollars (the Susan B.
Anthony) have been unpopular with the public. Still as other famous
presidents make the cut (John Adams, Thomas Jefferson, James Madison) the publicity
is good for everyone in the coin business. The Mint has devoted an entire
page to these new dollars so check it out for all the details at
http://www.usmint.gov/mint_programs/$1coin/. They are historical and
interesting but as far as making money goes...here is the inside scoop: The
majority of these coins will be worth their face value but there are some
exceptions. The presidential dollars are different in that they have edge
lettering (the mint mark, the date, In God We Trust, and E Pluribus Unum). In
the minting process some of the Sept 1 - Dec 31, 2006 1. The latest Washington Wire has been mailed from our friends at ICTA (The Industry Council For Tangle Assets). As you may know ICTA is a trade organization formed to help dealers and investors alike sort out various government rules and regulations. We are founding members of this national voice for precious metals and rare coins and believe such representation is vital to this industry. Dealer membership in this type of organization is a good way to evaluate your current dealer. Membership in trade organizations is a good beginning indicator that your dealer has a stake in the precious metal and rare coin industry. And this commitment leads to better service and better ways to resolve problems should they arise. To learn more about ICTA check out their web site at http://www.ictaonline.org/.
2. As we approach this holiday season let me wish all of you good health and God's many blessings: CNI will close this Thanksgiving on November 23rd (Thursday) and November 24th (Friday). For Christmas we will close December 25th (Monday) and December 26th (Tuesday) and for the New Year we will close January 1st (Monday) and January 2nd (Tuesday).
3. So what's in store for the New Year? Ah, the great question and one that appears in a number of e-mails. I guess a hedged bet is not so good but in this case it will have to do. It really depends on what gold does. With oil above $60/barrel and inflation numbers finally beginning to move I think you will see gold challenge $1000 in 2007. And the press for gold has turned from ho-hum to positive once again. There are a number of great articles on the subject there is even a new book. Barron's featured, Commodities Rising, written by CPM Group's Jeffrey Christian, received the top recommendation for this year's holiday season Gifts for Readers. The book is subtitled The Reality Behind the Hype -- and How to Really Profit in the Commodities Market and is published by J. Wiley & Sons. So what you say? This may be just another push at higher prices, which disappoints and falls back as the cost of living moves higher. We have seen a number of these in late 2006 as gold moved between the $540 and $600 range. And what about the recent highs in stocks, does that make any sense? Actually it does for were else is all that hot money going to go? In my mind the true excess of investment dollars makes the best case for the eventual long-term rise in gold. A fair amount of the hot money in stocks at this time will move into gold as it surpasses old recent highs ($721.50 - 5/11/06). The long-term big buyers of physical gold have already restarted their engines. Our physical sales in late December rose considerably and I'm talking about individual sales in the $50,000 to $1,000,000 range. So all other things being equal you should already have a bullion gold position and consider adding to it on any pull back in the market. Finally keep in mind that once gold moves into the mid $700 range all technical trading programs will signal a major buy and no professional trader will consider shorting this beginning to rage bull.
The upside is also difficult to figure but remember that when gold collapsed in the 1975, as legalized gold ownership in America failed to impress the average Joe, no one on earth would have figured gold would top $800 just 5 years later. A similar 6-fold increase on today's market would place gold at $3720! Sounds silly to consider such a move but in a market place with so much available cash funnier financial things have happened.
So what will happen with the certified rare coin market? If gold moves into new higher territory the certified market will continue the advances we have seen over the past few years. Rare coins are also getting good press from previously unfriendly venues. The recent Wall Street Journal article (Monday, December 18, 2006 - Where the Smart Money Is by Rebecca Buckman) is a good example. The important thing to remember about this market is that the number of quality PCGS certified rare coins is limited relative to the number of dollars available. This is not hype it is a fact that all seasoned dealer have known for years. That is why every major coin dealer I know invests his own money in areas of interest. This is not typically short-term money so over time this adds stability to an already active market. In the raging bull market in rare coins of the 1970's all dealers I traded with keep their excess cash in product. So how does this current rare coins market compare with those old days. Actually the advent of PCGS certified coins has simply made the total number of coins smaller by a large degree because independent grading provides the public with a level playing field. In other words anyone can compare services and grades and prices.
Now add the knowledgeable collector and you can see where today's short supply is going. This collector may spend an entire lifetime assembling a collection that may not be seen for generations. This supply factor is important to understand because it has long term consequences. This type of buyer tends to be highly intelligent, willing to wait for just the right coin, and most are well healed.
All
of these factors bode well for PCGS certified rare coins. But the most important
investment aspect of certified rare coins is that it has the same common
denominator as the gold bullion market. Now don't misunderstand, bullion and
rare coins are radically different and every person should have a little of
both. But the notion that they share a common investment thread can put money
in your pocket. That is simply the notion that most people in the
Finally let me pass on an old saying you have heard many times but was a favorite of my dear Mother: "All of the truly great things in life are free". Enjoy God's many blessings with your family and friends and as 2006 draws to an end let me wish you all the best of the holiday season and a wonderful New Year. May 1 - Aug 31, 2006 Summertime
is typically a slower time for the metals and rare coins, but with all of the
problems in
The
new
The
other flavor is the same coin in proof form. Keep in mind that the word
"proof" indicates a method of manufacture not a grade description.
The proof
So what is a First Strike Buffalo? This is a regular bullion coin, not a proof, which has been sent to PCGS for grading within a small window of time. PCGS makes the determination of First Strike using the date slip included in all original boxes. In other words, PCGS will grade and identify the first bullion production coins and if submitted in time will designate them First Strikes.
So which is the better choice? Like so many other things in the coin business, it depends on what you are trying to do. If you want a gold Buffalo which moves up or down with the price of gold stick with regular production coins. The low premium make this choice attractive and it is the first choice of most bullion investors.
If you want a special gift consider the proof. It costs a bit more but the presentation is worth the price and it will always remain a treasure. I would not suggest you purchase a large number of these because recent issues tend to be volatile.
I'm
afraid my last choice would be the First Strike issues. These are simply
bullion coins in certified holders and the extra cost involved does not make
any sense. All things considered if gold moves higher, you will make the
least amount of money with First Strike coins. I
hope this will help you enjoy the new
2. More on what every dealer calls "the after-hours market" in gold. As I have said before, there is rarely an after-hours market, but there are exceptions. These exceptions happen when everyone gets nervous after the traditional domestic markets are closed. This happens as a result of some economic or political upheaval. A careless word by Bernanke or an act of war or terror which causes a flight to quality response. These type of problems cause traders to hedge their bets in the physical market because they can't in the traditional paper markets. So physical gold prices are adjusted after the domestic market is closed. This adjustment can be up or down according to the perceived level of threat. A few dollars to perhaps ten dollars will be added or subtracted to the price of all bullion coins. When exactly this will happen is difficult to say, but keep in mind that when a trader adds $10 to his selling price, he also adds $10 to his buying price. The same is true if he is heading in the opposite direction. If you are doing business with ethical people an after market is not something to fret over. It should not deter any action on your part relative to what is going to happen the following day. In my mind gold is heading much higher. The coming decade will produce new record prices as everyone begins to understand just how much money the government prints everyday. Along the way we will see pullbacks which should simply be used to add to your core holdings. The "after-hours market" is simply another indication that this well established bull market in metals is alive and well, and is working out a few kinks along the way.
3.
Looking for a good rare coin investment? Forget about First Strike anything
and look carefully at the decreasing premiums on $20 Saint Gaudens in PCGS MS
63, MS 64, and MS 65. Premiums on these coins are the lowest I have seen in
years, relative to the price of gold. Now add the notion that summer time in
the coin business is traditionally slow meaning the frenetic pace which
pushes prices higher is replaced with figuring out what the family will do
when visiting
4. I always like to look at the "Red Book" (A Guide Book of United States Coins) by Richard Yeoman. And older editions are just as interesting as the most recent edition (2007) because the publisher (Whitman) adds new information. The 2007 edition, for example has the Top 250 Auction Prices which lists the most valuable 250 rare coins sold at public auction. Holding the first spot (Rank 1) coming in at $7,590.020.00 is the famous 1933 $20 Saint Gaudens which sold in July of 2002. Ranked Number 2 at $4,140,000.00 is the finest known (PCGS Proof 68) 1804 Class 1 silver dollar sold in August 1999. This list goes on but what is fascinating is that the first 22 spots are filled with rare coins which weigh in at a million or more! This list alone is worth getting the book, which is available from us or your local bookstore for about $15.00. Dec 1 - April 28, 2006 1. It is easy to see a few changes on the site especially when it comes to ordering. The $2000.00 minimum on bullion orders made sense because of the rise in general prices and it allows us to maintain the free shipping policy. Kenny Edward's new 24 Hour recording on the site in MP3 form under Quote Line/Specials should make for interesting listening. He makes two recordings, one in the morning and one when the markets close. Keep in the mind then that prices quoted in the morning are subject to change as these markets will move up or down. The 2nd recording is done after the Comex close (11:00 AM PST) and prices usually remain unchanged until the business closes at 5:00 AM PST. Note that I say usually because there have been times when an after market has effected closing quotes. This was a common occurrence in the 1970's but is infrequent today. Just keep in mind that as today's markets make new highs and become more volatile an after market could well develop. In today's crazy world a nuclear threat or political disaster could cause an after market change in prices.
2.
How important is eye-appeal in coin selection? With the advent of independent
3rd party grading (PCGS) some collectors and investors fall into what I call
the classic price trap. The less experienced simply compare PCGS prices
(always a good idea) but then fail to understand the all important factor of eye
appeal. Unfortunately all PCGS MS 65 Saint Gaudens are not the same, and
this holds true for all
3. I was looking through this week's Coin World and came across a book that while not for everyone will certainly end up in my numismatic library. The article begins "Better an ounce of luck than a pound of gold", states the Yiddish proverb at the start of Collecting Lucky Coins, Tokens and Medals, by Rita Laws ($14.95 from the House of Collectables). This book serves as an "instant expert" guide for those looking to expand their knowledge on this genre of lucky numismatics. There has always been small stories shared between dealers when talking about coins or paper money which are rumored to be good luck to the holder. This area of collecting is entertaining and historically interesting but I have never seen a book on the subject.
4. We are now approaching $100 million dollar in annual coin sales, which means we also purchase about $100 million dollars worth of PCGS certified rare coins and precious metals. Old time coin dealers used to add these two numbers together and claim $200 million in business, which is true but somehow seems like an inflated number used to impress rather than educate. At any rate we do a lot of business nationally and sometimes the packages we receive in the mail could use some improvement. Consider the following to insure your PCGS coins and bullion products arrive in good order: a. Always make arrangements before shipping to the store. When you call you will receive a vendor purchase order number and we will be able to match that number with your package when it arrives. b. Always include a packing slip which states who you are, our purchase order number, your mailing address and instructions as to how you would like to be paid. Your daytime telephone number is also important in case there are questions. c. Wrap contents securely, and never send your coins loose. Coin tubes which contain bullion coins should be wrapped with nylon tape to prevent opening during transit, then cushion your coins with bubble wrap, and finally roll in plenty of newspaper. This package can then be safely placed in a secure, hard cardboard box with additional packing material. The same procedure should be used for PCGS graded coins, they must also be protected before shipping even though they are in their own plastic holders. Shake your completed package and if you hear anything rattling around you will need to add more cushioning. If your coins were originally mailed by us consider saving the original packaging for return shipment. d. Insure all packages for their full value and make sure we are required to sign for the package at the CNI building. Thanks for following a few important rules and if you have any questions about packaging or shipping call Bill in shipping toll free at 1-800-225-7531.
5.
This is a common e-mail theme and relates to both the price of gold and the
price of certified rare coins: Do you think these markets are running out of
gas? An interesting idea in that we have had a few good years of gains but my
personal opinion is that this is only a good beginning. This is not as self
serving as it might appear even though I'm considered a huge conservative in
this trade. Both of these markets are demand driven and we have had a solid
increase in demand. But the real gains in both gold and certified coins will
be seen when inflation begins to creep into the national numbers. Like I said
before, real estate has always been a good leading indicator and with the
Alex Sanchez works for CNI and is accomplished at watching and interpreting charts. In trade parlance he is more driven from the technical side than someone like me who takes a fundamental approach. The majority of gold traders are driven by chart patterns and watch them carefully. Alex gave me an interesting magazine called SFO Stock, Futures and Options Magazine. I'm not a big fan of futures trading but there was a compelling article in the SFO March issue. It was written by John R. Hummel and is entitled Can The Present Dollar System Survive? In A Little History he explains clearly why the world functioned better on the gold standard. John Hummel foresees a dollar collapse and concludes that gold is likely the major beneficiary. He then compares the price of gold in 1980 ($850.00) with a comparable level today ($4,000.00 to $6,000.00) and believes that recent gains are just the beginning as the US dollar simply gets weaker. I found this article to be 100% believable and professional. Not an exaggerated piece designed to sell product. If you would like a copy of Mr. Hummel's work call Ken Slater or Alex Sanchez toll free at 1-800-225-7531. This current article makes an excellent case for owning gold today. |
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