“The sky is falling, the sky is falling!”
Remember Chicken Little’s refrain, “The sky is falling, the sky is falling?”
Today, many doomsayers predict the end of our economy in a few weeks, a few months, a couple of years or even several years. After hearing so many people talk about doom and gloom, some people get severely depressed while many just become desensitized to the fatalistic views.
For those of us who get desensitized, maybe instead of Chicken Little, we should think of the Boy Who Cried Wolf. He cried, “Wolf,” so often that when there was a wolf, people didn’t listen to him.
Perhaps that is the situation we face today. The economy is not cataclysmic yet, consequently fatalism begins to sound a lot like “wolf.” But, on the other hand, enough market indicators, not just the doomsayers, predict there will be further difficult times in the US and the world.
Take a look at this gentleman’s “proposition” for the US dollar’s demise in 2012: USD collapse in 2012…end of the world as we know it. You can find further information about the author, Chris Laird, here: http://www.prudentsquirrel.com.
Mr. Laird claims that if/when the US dollar collapses, expect these failures to begin happening:
- “The US and Western economies will all face insolvency simultaneously, with the US first in line.
- The entire Western industrial/consumer/credit economy will fall apart so fast it will make your head spin. The supply chain will stop and stores will empty in less than 3 days.
- The USD will fall over 50% in one week’s time, till it temporarily stabilizes before its final last gasp. Remember the Lehman panic over those several weeks? You have seen nothing yet.
- Worldwide currency panic will set in paralyzing what’s left of the world economy, that means the ‘emerging markets’ stop dead too.
- China has a revolution, or goes into military mode, which is worse.
- A one world currency will be demanded and implemented, and it better be fast too since the cities only have 3 days food on average.”
Other people also claim the US dollar will collapse in the near future. Much of the world’s economy ties either directly or indirectly to the dollar. As such, the dollar’s collapse could cause mayhem around the world. More importantly, it could disrupt our day-to-day lives for days, weeks, months.
Maybe desensitization as self-preservation solves a short term problem, but in the long term we need to be concerned and prepared for tough economic times.
Pocket Change – Pennies
For years, if people saw a penny on the ground, they wouldn’t bother to stop and pick it up. But, what if a penny found in pocket change is worth more than a penny?
Well, take a look at this article in Numismatic News: New Lincoln ‘P’ Cent Scarce. When there is scarcity, increased value generally follows.
They comment in the article that many people do not even realize there were four commemorative Lincoln cents put into circulation in 2009. Could it be that many people’s uninterested view of pennies contributes to this lack of knowledge?
Ahhhhh…but perhaps this lackadaisical view could benefit those who are aware not only of the new pennies in circulation but also the scarcity of some mint marks.
The Numismatic News article talks about the fourth Lincoln one cent coin introduced to the public in November otherwise referenced as the Presidency Lincoln cent. It seems those Presidency cents minted in Philadelphia, the ‘P’ mint mark, cannot be easily found even through the banking system.
But what if you find these Presidency cents in pocket change? And, what if they have the ‘P’ mint mark?
Let’s take the easy route first. If you don’t care, then spend ‘em, they’re worth a penny.
But, if you are interested in their value as both a collectible and a scarcity, protect the coin from any further scratches and fingerprints. If you have 2×2 coin holders, carefully place each penny in its own holder. If you don’t, protect the coins by wrapping them individually in a soft cotton cloth or in plain white paper until you can properly protect them with numismatically approved coin holders.
Now, how much will your protected pennies be worth? That remains to be seen. It depends on their scarcity, on their condition (since they were circulated), and on people’s interest. Remember, these four special versions of the Lincoln cent produced in 2009 as a centennial commemoration of the release of the first Lincoln cent will not be issued again.
At worst, your efforts will be in vain, and the coins will remain worth a penny. At best, who knows? You could enjoy several thousand percent gain on each penny.
As the general public catches on, maybe the penny will re-gain the respect it deserves. In the meantime, have fun searching your pocket change for those elusive Presidency cents.
Gold and Metal Prices
Some people prefer this site for the most current gold and silver prices: http://www.monex.com/liveprices
This site provides an at-a-glance view for a variety of commodity metals including current prices for 90% silver and 40% silver coins along with the most popular gold and silver coins.
To see their historical charts, click on the circle with the blue squiggly line under the chart heading. They include 3-month, 6-month, 1-year, 5-year and 10-year charts for each of the listed commodities. Provided, of course, the commodity was available for those periods of time. For example, the American Gold Buffalo first appeared in 2006.
For an interesting exercise, open the 1-year charts for several comparable commodities in different tabs in your browser. For example, open the year chart for Gold Bullion, American Gold Buffalo, American Gold Eagle, Gold Philharmonic. Gold Maple Leaf and Gold Krugerrand.
Next, click from one tab to another for a quick view on how the related (one troy ounce of gold), yet different, commodities performed throughout the year. Note the time span across the x-axis remains the same, but take a look at the y-axis on the left as it changes among the commodities. The peaks and valleys appear relatively consistent with perhaps a day or two difference, but the prices vary slightly among the different commodities.
Within those same tabbed windows, change the chart type to the 3-month chart for each commodity. Next, click among the charts to see the variances.
Interestingly, the American Gold Buffalo performed differently than the other commodities in the October and early November time frame. The Gold Buffalo began the quarter performing better than its counterparts but came in line with the others in December.
Very interesting…
Gold – Bullish or Bearish?
It depends on who you ask.
Take a look at this Canadian’s viewpoint: David Olive’s Don’t Believe the Hype over Gold
Is he right? Well, in some ways, he’s right. Gold does not pay interest or dividends while being held, and it is not liquid.
As for the investment value of gold, if you keep informed to buy low and sell high while also considering inflation, then your gold purchase succeeds. If you buy high and sell low, then, obviously, your investment fails.
On the other hand, an immeasurable benefit of buying and holding gold longer term is you’re not buying and losing in other markets. Granted, that’s not necessarily a good investment in a good economy, but when the economy turns and turns rapidly, having gold can be a good asset.
In some ways, he’s wrong. He claims an “almost infinite supply” of gold. That just can’t be true. “Infinite” implies never-ending and “supply” implies readily available, yet physical gold is difficult to acquire. Many people (individuals, businesses, banks, countries) choose to keep the gold they already have while mining companies find decreasing yield in raw gold from their mines. Neither of those situations presents an “infinite supply” of gold.
Of course, as the Canadian commented, you can’t buy groceries and gas with gold in a total apocalyptic environment. Well, an apocalypse is always possible, but not likely. People worry about asset protection when buying gold, not about buying groceries with a gold bar.
As a counterpoint to the Canadian’s article, take a look at this less emotional analysis of both the gold and silver markets: Gold to recover: New bull move ahead?
And another analytical view: Gold market update
So, is it best to be bullish or bearish on gold?
Your best course of action includes researching current markets and trends, understanding historical markets and impacts then applying knowledge of today’s economic and global influences to your investment strategies.
As a closing comment, you might consider collectible gold in your investment portfolio – gold that has numismatic value in addition to pure gold value.
Commodities including gold and silver
Pundits appear frequently to add their comments about gold, silver and commodities. Some of them gained their experience as observers. Others gained their experience actively researching and investing.
This gentleman from Alabama successfully invests in the international markets. Take a look at some of his commentaries about the economy – in general – and about gold and silver – in particular.
Here’s an interview he did for BusinessWeek: Jim Rogers on Why Gold is Glittering So Brightly
Along those same lines, here’s an interview he did for Bloomberg TV: Jim Rogers Live Interview from Singapore
On Yahoo Finance: What Recovery? America’s Problems “Getting Worse, Not Better,” Jim Rogers Says
In that article, “The problems in last two years came from industries that are heavily regulated: banking, insurance, mortgage,” he notes. “Now what? You’re going to make the regulations tougher? It’s not the regulations, it’s the regulators.”
You can find more from his Blog: Jim Rogers Blog or from his website: http://www.jimrogers.com/ (Note: scroll in the left area to find links to his most recent interviews and comments.)
An interesting man…is he right? Who knows for sure, but his expertise provides him more background and more knowledge than some we see and hear frequently….
Commission versus Profit
Now why is it that two words with similar meanings have two very different reactions?
First, the dictionary definitions:
commission – n. – A fee or percentage allowed to a sales representative or an agent for services rendered.
profit – n. – The return received on a business undertaking after all operating expenses have been met.
In both cases, someone is receiving monetary compensation for goods or services rendered. However, many people think of commission in a positive way, whereas profit is a dirty word.
Why is that? Could it be the Negative Nellie media have brainwashed people into thinking businesses making a profit are BADDDDDD?
What purpose does that serve? Those same businesses hire people and provide goods and services. How can the business owners do that without making profit for themselves?
Should they provide the goods and services for nothing? Then it’s charity not a business. Who funds charities? People who make money fund charities. But if people can’t make money with their businesses then there can’t be charity.
What an odd concept. Businesses are horrible if they make money, yet people want businesses to hire them, pay them and allow them to buy goods and services from other businesses.
Without profits, this whole scenario becomes a conundrum.
What generated this discussion?
Well, a coin dealer advised that when someone asks why he’s not paying full melt value for gold, he explains the difference is commission. He used to try to explain the difference was profit, but he learned that people became angry with the word “profit.” Now, when he says the difference is commission, people nod their heads knowingly.
It’s a strange, strange world…
Kids and Collecting
Have you ever noticed? Young children love to collect treasures. Their treasures can be rocks, string, bits of metal or anything that catches their imagination as a treasure. Have you also noticed that young children are very curious and inquisitive?
Let’s see, collecting and curiosity – both are traits of the coin collector! Why not introduce a child to coin collecting to satisfy their treasure collecting interests and their curious natures?
The state quarter series provides an inexpensive way for children to start a coin collection. At first, they can collect the quarters as circulated coins in pocket change. Later, they can learn about mint marks, grades and other coin collecting characteristics.
Learning opportunities abound for the young collector. They can learn responsibility and earning as they do small jobs in the neighborhood for pocket change. They can learn money and personal interactions as they request quarters in change when they buy something. When they start getting more interested, they can learn how a bank works by going to the bank for rolls of quarters to search for the missing coins in their collection.
Plus, the quarter coins teach history and geography while the children collect them.
Peak a child’s interest and get them started on a lifelong hobby that can be fun, interesting and valuable.
Gold Performance Over Time
Take a look at this interesting commentary shown on kitco.com: Why the Gold Bears are Wrong Once Again by Peter DeGraaf.
His article highlights several activities occurring not only in the gold and stock markets but also those activities occurring on the world stage.
He notes that many analysts look at the surface performance of gold in relation to the dollar, but they either forget or dismiss the real relationship. That relationship, Mr. DeGraaf claims, is the historical significance spanning 5000 years of gold being the “template against which all fiat money is measured.”
As for the US, we’re not 5000 years old as a country or government. However, we used the gold standard for many years. This article by a Rutgers University economics professor provides historical background for how the US used the gold standard: Gold Standard by Michael D. Bordo. Interestingly, Mr. Bordo concludes his article by commenting, “Although the last vestiges of the gold standard disappeared in 1971, its appeal is still strong.”
Based on recent activity with people, banks and countries clamoring for gold bullion, the importance of gold has not diminished.
In his article, Mr. DeGraaf provides charts and observations of dips and advances of gold over time. He highlights the areas where it was a good time to buy and a good time to sell gold. Though this is looking at historical information, he archives the articles he published at those times on his site: www.pdegraaf.com.
But, his main article goes on to comment on how the performance (deficit) of the FDIC and the performance (deficit spending) of the US Treasury can be bad for our economy but can increase the gold values.
Perhaps most worrisome, Mr. DeGraaf ends his commentary with the chart showing how much private sector business experience the cabinets of presidents have had over the years starting with Roosevelt.
For those of you who remember the economic woes of the early 1980s, President Carter’s cabinet contained just over 30% of people experienced in the private sector. Now, our current president’s cabinet cannot even claim a whopping 10% level of experience.
Yet, these are the people who are supposed to solve the economic challenges we currently face.
Historically, a good economy drives gold prices down.
Do you think the economy will recover quickly and make gold’s value decrease?
As Scarce as Hens’ Teeth
Well, maybe not quite that scarce, but they’re still very difficult to find. “What are you talking about,” you say?
2009 American Eagle coins from the US Mint, that’s what.
The American Eagles are not impossible to find; however they are very difficult.
Take a look at the comments on these pages from the US Mint:
American Gold Eagle Proof “Update: Due to the continued, sustained demand for American Eagle Gold Bullion Coins, 2009-dated American Eagle Gold Proof Coins will not be produced.”
American Gold Eagle Uncirculated “Update: Due to the continued, sustained demand for American Eagle Gold Bullion Coins, 2009-dated American Eagle Gold Uncirculated Coins will not be produced.”
American Eagle Silver Proof “Update: Due to the continued, sustained demand for American Eagle Silver Bullion Coins, 2009-dated American Eagle Silver Proof Coins will not be produced.”
American Eagle Silver Uncirculated “Update: Due to the continued, sustained demand for American Eagle Silver Bullion Coins, 2009-dated American Eagle Silver Uncirculated Coins will not be produced.” Caution: the mint includes an ordering field on this page, but it’s for a 2008 uncirculated dollar set which includes an American Silver Eagle.
As you can see on each of the above pages, the US Mint alerts that they are no longer making the 2009 gold and silver American Eagle coins.
However, take a look at this article in Numismatic News, Silver Eagles Sell as Supply Gets Rationed. The mint did restart production for the silver one-ounce eagle with over 1 million of the coins allotted to their distributors.
But, for a behind the scenes look, dealers comment that they cannot keep the coins. It’s rare for anyone to sell the 2009 American Eagles they’ve already bought, and the new silver coins just released are selling (have already sold) quickly.
Both numismatists and investors along with people new to coin collecting and investing want the American Eagles, both gold and silver. Therefore, the coins are difficult for dealers to keep in stock.
If you must have a 2009 American Eagle and not an earlier date, your search for the coin could prove to be a challenge.
Some American Eagle coins may be available on the bourse on Sunday, but if so, they will go quickly. (Note, that says “may” which is NOT a promise there will be 2009 American Eagles on the floor.)
If you do not have the time or wherewithal to search for the 2009 American Eagle coins, perhaps you should have an alternate in mind. Maybe an earlier dated American Eagle will suffice this year. Or, perhaps another similar metal (gold or silver) and size (1 oz.) coin will serve your purpose.
Enjoy the hunt, but remember, the bourse gets busy quickly. Come early for the best available coin selections.
How to Invest in Gold
An interesting slide show on TheStreet.com talks about the various ways to invest in gold.
As many coin dealers will agree, they start their slide show with the statement, “To get the best unleveraged exposure to gold’s spot price, physical gold is the best investment.”
However, they go on to talk about the challenges of acquiring and storing physical gold. Gold, by the way, is a heavy metal, and a quantity can pose security challenges for storage. But, several institutions offer safe, secure storage solutions.
In addition, the slides mention the ease of investing in gold stocks, but they note risks that may turn some investors away. The exchange trade funds (ETFs) provide investment alternatives that are physically backed with gold. However, with skepticism showing, how do you know they have the physical gold – especially these days when physical gold is becoming more difficult to acquire?
With higher risk involved, the slides talk about exchange traded notes (ETNs) that deal with gold futures. Now, people propose that gold will rise to $5000 per ounce, but are you willing to gamble that they are right? It really depends on not only your comfort level with risk but also on the amount of research you do before investing in ETNs.
Of course another investment in gold occurs with the mining companies. TheStreet.com TV video discusses their favorite mining companies and includes interesting mining and melting footage.
However, one component they did not address was the increased cost of mining with the decreased ore yield per ton. See our earlier commentary on the gold supply and decreases in yield.
Have the investment analysts considered how this decreased yield will impact the mining companies’ cost structure and net profit? Before investing in mining stocks, make sure your research considers historical performance AND their efforts to counteract the reduced ore yields in their overall business strategies.
As a final measure, the slides talk about a gold miners’ exchange traded fund (ETF) that includes a collection of large cap mining stocks.
Which investment vehicle is best for you? Are you comfortable with risk? How much? Have you done the research on the ETFs, ETNs, and mining companies? How do you know the research materials are factual and complete? Just look at the bad information in the media and on the internet – what’s right, what’s incomplete and what’s misleading?
With all of that, acquiring and storing physical gold doesn’t seem to be as difficult and as much of challenge when compared to the risk of the other gold investment vehicles.
