cnpcoins

The Twenty Foot Rule

A favorite saying of mine is that what impacts each of us most is what happens within 20 feet from where we stand. It is easy in this 24 hour news cycle of crisis and fear world to get consumed with events that ultimately have no significant impact on our lives. I know this first hand since part of my job is to stay informed about economic and political developments that impact rare coins and precious metals.

And yet, when I take a moment to see what really matters, I think of my just arrived grandson and granddaughter on the way in 2016, and that my wife is thriving after open heart surgery in September. In that context, what matters most isn’t the latest Trumpism or calamity out of Europe, but family, peace of mind and the tremendous satisfaction from running a successful business that helps people achieve their goals.

What are your goals? What would you like to achieve in 2016? Is this the year when you finally get a sufficient supply of gold or silver to insulate you from stock market volatility? Is this your year to take advantage of favorable pricing and availability to assemble that specific set or key date rarity you have long desired?

Or, maybe this is the year where selling all or part of your collection makes sense considering your circumstances. Whatever your goals, I am committed to helping you achieve them; I believe 2016 will be an extraordinary year for coins, and I look forward to working with you.

Join me at the San Francisco Coin Show, Saturday-Sunday, February 20-21,

South San Francisco Conference Center
255 S. Airport Blvd.
South San Francisco, CA 94080

PS Sign up for The Rare Coin Report, a complimentary report sent in the mail 3 times a year www.cnpcoins.com

Why “Spot” Prices for Gold and Silver are Misleading

Something very interesting occurred a few months ago: the spot price of silver dropped about a dollar an ounce. At the same time, spreads for physical silver, most particularly for 90% silver coin (1964 and earlier dimes, quarters and halves) increased by about a dollar an ounce. In other words, even though the spot price for silver dropped, the physical price remained constant.

We have seen this before. The reason is that the spot price reflects the projected price in the future and relates to projected mine output as well as the needs of the banking industry. Many banks hedge their accounts with gold and silver, but instead of using the actual metal, they often buy futures contracts. Futures contracts cost a fraction of actual metal, and incur no storage costs, so for banks, this can be a cost effective hedging method. When a contract runs out, banks typically sell them, and take the profit or loss, and then buy new contracts.

This works great if no delivery is required. However, if Dr. Ron Paul is correct, and weakness in currencies or the banking system sufficiently intensifies, the mad scramble to fill those contracts could force gold and silver to as of yet unseen heights.

It doesn’t appear this “doomsday” scenario is imminent, and I do not predict it. However, with all currencies no longer backed by metals, massive world wide quantitative easing debasing all currencies, and ever increasing governmental intrusion into banking and finance combined with the runaway potential of technologically driven trading, this kind of scenario has become potentially viable.

It therefore makes sense to hold at least some gold and silver physically—just in case.

PS - Meet me at the Las Vegas Coin Show on Friday, December 11th through Sunday the 13th. I'll be in booth number 1004 and I'm always happy to answer your questions, and take a look at your coins. We buy and sell at the Coin Shows. For a free pass, click the link http://www.ckshows.com/registration-winter.htm

 

Who Should NOT get a Gold or Silver IRA

Much time, energy and money is spent by companies advertising Gold and Silver Individual Retirement  Accounts. They often cite an upcoming currency or stock market crash or other calamity, all of which serve to hide a very simple fact: These companies make a fortune selling these accounts. After all, someone has to pay for those ads! And they are not for everyone.

While PM IRA’s (Precious Metals IRA’s) have many advantages, those benefits are much greater for some people than for others, and for some, they are not advisable at all. What criteria should you look at to determine if a PM IRA is right for you?

First, let’s look at the structure of PM IRA’s. You need three parties, a precious metals dealer, an IRA administrator, and a certified storage facility. When you open a PM IRA, you first set up the account with the IRA administrator, usually by rolling over or transferring funds from your existing IRA or other eligible retirement account. You then work with your precious metals dealer to purchase the materials that go into your PM IRA, and place them physically in a certified depository in your segregated account. Often, the precious metals dealers act as the facilitator for the entire transaction. You the customer never touch the metals purchased.

While the dealer makes his money on the purchase and sale, both the IRA administrator and the storage facility charge an annual fee (usually around $100 and $150 respectively. That $250 per year is not a lot per se, and on a large account, it is negligible. However, on a small account, those fees can represent a hefty percentage. For example, on $10,000, the $250/year represents an annual 2.5% load, heavy for an IRA.
More important than the fee is the question of whether precious metals fit properly into one’s overall financial plan. This is a more complex and completely personal determination, and relies on such questions as to whether it’s better to hold metals in an IRA, or buy them with after tax dollars, so as to have one’s metals in possession, where they are liquid without tax penalty. One’s age and retirement goals also come into play. Many people use both methods.

There is also a numismatic trap in precious metals IRA’s. Some dealers encourage their customers to buy certain IRA eligible mint and proof sets using the logic that these will appreciate more than the actual gold or silver.  While a small percentage of modern coins become truly collectible, most do not, and the high premiums usually charged for such coins can make them losers, even if metals prices push upwards. For this reason among others, I usually recommend that only gold and silver American eagles be used for IRA’s.

If a dealer pushes too hard, or is unable or unwilling to address these concerns, they may be thinking more about their commission than about your welfare. In such cases, find another dealer.  

Lawrence D. Goldberg is the author of What Color Are Your Assets? An Insider’s Guide to Rare Coins and Precious Metals (Zyrus Press) and CEO of Customized Numismatic Portfolios, Inc. (cnpcoins.com) Sign up for the complimentary print version of the Rare Coin Report, published three times a year and delivered to your home or office. Cnpcoins.com/contact.html

It's A Buyers Market for Rare Coins and Precious Metals

I’ve just come off the road, having attended four coin shows (Long Beach, Las Vegas, Santa Clara and Santa Rosa) in as many weeks.  Coin shows present an outstanding opportunity to gauge the mood of the public, and to exchange information, observations and experiences with other rare coin dealers.

What makes this four week period exceptionally fascinating is that it corresponded with approximately a 10% drop in the price of precious metals: about $100 per ounce in the price of gold, and about $2 per ounce in silver.

Coin show attendance by the public was also sparse. It is impossible to know for sure if the drop in metals prices caused the lack of public patronage, but that seems likely. Some dealers speculated that it had to do with general public disgust with the state of affairs in the US and the ineffectiveness of US foreign policy, or a feeling of uncertainty about economic conditions in general, including fears of a stock market crash, or even the upcoming election.

And yet, some dealers reported strong on line purchasing by their customers. Whatever the case, the drop in precious metals prices presents an excellent buying opportunity.

One patron at the Las Vegas show – who bought up all the junk silver and close to bullion price BU rolls of quarters and dimes he could find - told me that he was shocked that there were not more buyers. Logically, that is surprising, but psychologically, it is not. Time and time again, I notice that when metals (or coin – or stock or real estate) prices are soft, people hold off buying. However, rising prices seem to bring out the buying public in force.

Maybe the public is simply afraid of missing out on a rising tide?

That attitude comes from short term thinking, where the goal is to generate maximum short term profits. The physical rare coin and precious metals markets are not typically short term markets. Thus, for long term accumulators, the best long term results are generally achieved by purchasing when markets are soft and prices are low.

Take a look at your long term plan. What do you want to have in your vault 10 or 20 years from now? If you are short of your goal, take advantage of the price drop to stock up. This is especially true for precious metals, but it is also true for rare coins.

Contrarian thinking is a true benefit in this kind of market.

P.S. My article on Rare Coins and Investment was featured in the September issue of the Las Vegas Coin Journal. These journals are a great way to build your knowledge base about Rare Coins. Please let me know if you would like a copy of the article

Learn About Hard Assets at the Las Vegas Coin Show, Friday, Sept. 14, 2014

Understanding how Hard Assets work in your portfolio or IRA helps to build value over time. I'll be speaking on the topic at the Las Vegas Numismatic Society Coin Show at the Palace Hotel and Casino in Las Vegas on Friday, September 12, 2014 at 10:30 am. I hope you will stop by my booth, Customized Numismatic Portfolios, Inc. (CNP Coins) or meet me after my talk. The more you know about Rare Coins, the better your investmennt decisions. See you at the show!!

Come Meet Me At The Long Beach Coin Expo Sept 4-6, 2014

Whether you are just starting coin collection or are a seasoned collector, coin shows are a great way to expand your knowledge and see what's trending in the Rare Coins and Precious Metal Market. I hope you can stop by booth 815 at the Long Beach Convention Center and bring your coins and questions. Did you know that we buy coins as well as sell them? The show runs from 10 am through 7 pm, from Thursday, September 4 through Saturday. Click on the link below for your free pass to the show!

Get your free pass to the Long Beach Coin Expo

See you at the show at Booth 815 Customized Numismatic Portfolios, Inc.

Economics 101: The Business End of Your Rare Coin Collection

In my 30+ years in the rare coin industry, I’m often asked the same questions by coin enthusiasts just beginning their journey into the fascinating world of numismatics. Yes, I know I said fascinating; for if you love the origins of something tangible or history or just love money, there is many a tall tale to be told around some coins. Understanding how some coins become valuable and why some do not is simply a question of Economics 101: The Law of Supply and Demand. In other markets, such as food and energy, demand is relatively constant, and therefore price changes are driven mainly by the quantity of available supply. If supply is plentiful, producers will drop the price to drive sales. Conversely, if supply is scarce, producers raise prices to insure the ability to obtain new supplies. What makes gold and silver different is that supply is limited compared with most other elements. If demand increases beyond supply capabilities, prices will rise because producing additional supply is much more difficult and time consuming than it is for most other products. Eventually, prices increase sufficiently to discourage demand, and encourage the creation of more supply, either from production or from people selling gold and silver back into the market (often taking profit on the price increase) causing the price to drop until supply and demand are equalized. Price is the measure and the regulator of the balance between supply and demand. In the case of a rare coin, what you see is what you can get. Supply is limited, so prices are driven by demand. So whether you need one more coin for a collection or love the story behind a particular coin, do your economics homework and pick a coin that has a future in the marketplace.

MS-66 Generic $20 St. Gaudens - Gold of Choice

Want to bridge the gap between gold bullion and numismatic gold? Consider the $20 St. Gaudens in MS-66. Combined NGC and PCGS populations for St. Gaudens in MS-66 total less than 40,000. In compari-son, there are about 200,000 Saints in MS-65. Yet, the price of the MS-66 is only about 20% higher. Interestingly, the MS-67 is nearly three times the cost of the MS-66. While far more rare - making it strictly numismatic - the huge price gap portends dis-proportionate price increases for the MS-66 in the future. For the investment minded accumulator, now is the perfect time to take advantage of the relatively low price and excellent spreads with outstanding upside po-tential by loading up on MS-66 St. Gaudens gold. Need more information? Contact me through our website Customized Numismatic Portfolios, Inc.

 

Rare Coins, Gold, Silver: A “Win-Win-Win”

Much is being said about the “fiscal cliff,” the Federal Debt, monetary policy, entitlement reform, taxation and the business climate. Whatever way events occur, all paths lead back to fundamentals.  The dominant fundamental condition impacting rare coins and precious metals is the inevitable fall in the value of the dollar.

            A falling dollar pushes up hard asset prices, which attracts more buyers, which in turn, pushes up prices even more.  Limited supplies of rarities could send prices to ballistic levels.

            A weaker dollar is driven mainly by huge Federal debt combined with artificially low interest rates.  The Fed must keep rates low as high rates would increase interest costs on the $16 Trillion debt to intolerable levels.  The Fed keeps rates low through quantitative easing: money printing.

            Political benefits are huge. Politicians can promise entitlement benefits without raising taxes directly to pay for them. Yet, each step in that direction weakens the dollar. Should it weaken too much, we will have collapse. As we have seen with the Euro, this could take a long time.  Thus, upward trends in hard assets should persist for many years.

            However, it is also possible we could reach a “tipping point,” due to natural calamities which might disrupt food supplies or electronic infrastructure, cyber attacks, war, replacement of the dollar as the world’s reserve currency, monetary default of a major state, large shortfalls of tens of trillions in unfunded federal government liabilities, sudden widespread belief that the dollar is at risk or other horror.

            Do not be fooled by comparing the dollar with other currencies. Countries from Asia to Europe are also printing, manipulating the value of their currency down. This enables values between dollars and other currencies to remain relatively constant even while all currencies lose ground against hard tangible assets like gold, silver and coins. 

            Economic weakness, uncertain business climate, and potential instability if government cannot meet its obligations create powerful incentives for individuals to reduce risk by switching assets into tangibles.  The prospect of increased taxes drives people toward areas with privacy advantages; Rare coins and precious metals enjoy an advantage here over virtually every other area of investment.

            Wealth preservation remains the name of the game.  This is unlikely to change any time soon.       Prices of most non-food goods and services are low due to years of flat economic growth.  An increase in economic activity, such as might occur through dramatically increased energy production—unlikely due to the results of the presidential election—or any other cause, would heat up the economy, driving prices for non-food and energy itemsback to normalcy—much higher than today. 

            Thus, even with economic recovery, rare coin and metals prices should rise, because increased economic activity will put in play literally trillions of dollars that are now sitting idle, currently generating no economic growth or profits.  The inevitable, unavoidable result is massive inflation.

            This leads to the remarkable conclusion that, regardless of what happens in the spheres of economics and politics, prices for rare coins and precious metals are headed upward.

            The simple explanation for this is that conditions necessary to drive up precious metals and rare coin prices are already in place and are irreversible, a debt that cannot be absolved except by payment.

            Specifically, it would take heroic and painful action to stop Federal Debt from reaching $20 Trillion by 2016 and $25 Trillion by 2020, or to stop the printing of Dollars, or reduce the increasing percentage of GDP devoted to entitlement spending.  None of that is likely.  Furthermore, some conditions driving  debt are completely out of our control, such as the transformation of baby boomers from producers of tax revenue to consumers of tax revenue.

            Investment oriented buyers see historically small spreads between bullion and gem quality $20 gold coins.  They see low prices for rarities for which the supply is thin and realize that increased buying will drive prices up.   Many buyers, including foreign investors are sitting on significant cash.   And they can move quickly.

            They see the opportunity, and they are buying.  That trend is  strengthening.  Also strengthening is the activity of collectors who now view lower prices and the availability of exceptional material as an opportunity to own the coins they have always wanted, with the very likely prospect of strong future profitability as a superb bonus.           

            If you have not already put at least 20% of your investment capital into precious metals or coins, you are advised to do so  immediately.  The dollar will weaken.  The question is how much.  Since any weakening of the dollar strengthens coins and gold, a strong presence in hard assets has low downside risk.  Of course, failure to follow this strategy in the face of a seriously weakening dollar could be potentially devastating.

RARE COIN REPORT NEWSLETTER UPDATE:  The fall issue of the Rare Coin Report has been delayed until the middle of November, due to an important announcement that will be made at that time.

 

November 1, 2012

With Hurricane Sandy dominating the news, closing the markets and wreaking havoc on the Eastern Seaboard, many people are taking a much desired respite from the constant drone of election news, political ads and election related stress and worry about their preferred candidate losing the race.

However, this “respite” has been evident in the coin market for several weeks now, as many are refraining from purchasing decisions pending the election’s outcome.  Conventional wisdom is that an Obama victory will bring strength to the gold market, whereas a Romney victory will bring strength for stocks.

Don’t rely on “conventional wisdom.” 

While there may be short term fluctuations in either direction, the long term fundamentals will always win out in the end.   The one long term fundamental of which we can be sure is that the value of the dollar will drop and will continue to drop for the foreseeable future.

The real reason behind the current slowdown in the rare coin market is uncertainty.  People just don’t like to make financial decisions when they are facing uncertainty, and this is one of the main reasons the economy has been weak over the last year.  It is also why prices for rarities are so attractive now, and why the spread between the price of gold and generic $20 gold coins is so small.

Once the election results are in, at least some of the uncertainty will evaporate.  Expect buying to surge.  This is because once the election is decided, people will latch onto whatever additional certainty they can grasp, and one of those certainties is inflation.

Therefore, if possible, buy before the election.

Look at it this way:  if Obama wins, there will be more federal spending and more growth in the federal debt.  There will be more worry about economic weakness and increased chances of a Greek style economic collapse.  Money printing will likely continue at full bore.   That is highly inflationary.

If Romney wins, there will be less worry about economic collapse, but the stage will be set for more economic activity.   This is critical, because up until now, all the monetary inflation from the printing of dollars has been masked by weak demand for goods and services, which has cause price deflation in practically every area of the economy except food and energy.  A Romney win would portend increased economic activity, putting upward pressure on non-food and non-energy prices.

Yet, money printing will likely continue because the massive $16 Trillion and growing national debt requires massive interest payments, and to keep interest rates low, the Federal Reserve will have to continue printing.  Moreover, while Romney is certainly a more stable choice than Obama from an economic standpoint, nothing he has proposed, and no policy he is likely to pursue will be able to stop the printing of dollars any time soon.  In fact, from the standpoint of exports – a critical need in terms of U.S. economic growth, money printing is desirable as it will lower the cost of our goods abroad by lowering the value of the dollar.

As this happens, instead of masking inflation, economic confidence and growth will put upward pressure on prices, and therefore dovetail with monetary inflation, driving up the “official” inflation rate.  An increased inflation rate will push more dollars toward rare coins

No matter how you look at it, inflation appears to be the one constant you can rely on.

Inflation is a positive for rare coin values and for gold, because both serve as a hedge to a falling dollar.  It is no wonder that high end buyers are paying record prices for art, cars and high end coins:  People who have a lot of money to manage know what is coming, and they are preparing.   Furthermore, supply is not that deep, so increased buying will likely soak up available supply relatively quickly, causing prices to advance.

Fortunately, there are excellent deal on many outstanding coins, both rare and gold dominated that can be purchased at virtually every economic level.

Right now, with MS-64 $20 Liberties at below 1.5x the price of gold bullion, and lower grades at an even more favorable ratio, and with rarities selling at well below PCGS.com prices in most areas, there are very attractive buy opportunities.  Waiting until the election will not likely deliver lower prices, because at least some of the uncertainty will be removed, and since inflation will happen no matter who wins the election, more buying is likely.

Thus, there is a good chance that prices for rarities and gold dominated generics will only increase after the election, no matter who wins.  Expect that trend to continue well into the future.