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A WORD ON GOLD INVESTING:

NOTE: The history of gold is the history of political power in the world. The ebb and flow of governmental gold selling and buying shows the ebb and flow of world power.

But what is gold?

First principle: gold is not an inflation hedge. During periods of massive inflation you could buy almost any commodity and make a killing. You don't need gold.

Second principle: gold is not a safety play. There's no such thing as a safety play in the financial markets. It's an entirely meaningless phrase. Any investment, including cash, treasuries and gold can wreck your portfolio if acquired in the wrong environment.

Why buy gold and gold coins?

Gold is a monetary instability hedge. Say it 10 times slowly.

It is a monetary instability hedge because it is a stable currency. It is a currency because it is used as such by the world's central banks, and with some minor effort it is convertible into all other currencies in all the major cities of the world.

It is stable because it can not be printed at will or created electronically.

Gold does well during periods of inflation when the inflation is a product of a huge current account deficit and a weak currency rather than a product of a rapidly expanding economy and a stable currency.

Gold does well during periods of deflation when the deflation is a product of a debt driven liquidity crisis morphing into a solvency crisis rather than a product of a stable yet stagnant economy experiencing a bout of very slow growth.

But Gold does best as Confidence in the efficacy and fairness of our Financial Instituitions begins to crumble.

Right now confidence is waning year over year. It appears to stablilize for periods withing this overall era of waning confidence but over time the trend is clear.

They key to the instablility is twofold. First, the middle class is getting systematically destroyed by a perpetual policy of negative real rates. Real inflation for real people is about 10 percent year over year and has been so for the last 40 years. Yet the banks gives you no interest when you loan them your money. Thus they steal 10 percent of the money every year from the middle class and plow that money back into assets like real estate, forcing the prices up precipitously even as the buying power of local currencies deflate. This is a death spriral for the middle class

Second, our financial system has 500-2000 trillion in unregulated derivatives. The counterparty risk in this is systematically unstable. This will be the issue of the next 10 years that must and will destroy competing currencies. Derivates are priced mostly in dollars. Even Gold derivatives are priced in dollars. Financial instability due to disruptions in the derivatives markets have not yet been priced into gold.

So who's to blame for our current mess? Sorry, but it's not Karl Marx. Let's start with Ronald Reagan, a man who turned the greatest creditor nation the world had ever seen into a debtor nation. A transition from which we have never recovered. (See a note on supply side economics below.) George Bush 1 tried to restore some fiscal sanity, and was crucified by his own base for this act of apostasy. Then Bill Clinton handed the reigns of the economy over to the CEO of Goldman Sachs, Bob Rubin who trashed Glass Stegal, which opened the way for the tragic era of unchecked Wall Street greed. This set the stage for George Bush 2 who destroyed the regulatory and oversite systems and stocked them with lobbyists and coroporate cronies who used the offices to plunder the American tax payer. Then when system collapsed under the weight of its own greed and inefficiency Bush installed the CEO of Goldman Sachs to take over the government, and Henry Paulsen used the opportunity to effect the greatest transfer of wealth (form the US tax payer into his own pocket) the world had ever seen in a series of bank "Bailouts." Enter Obama who is now restoring oversite not by getting smart capable people back into existing positions, but by creating whole new layers of government beaurocracy, with borrowed money. There's plenty of blame to go around. But ultimately we elected these clowns.EEnto

Add to instability a crisis of confidence: The financial markets have been willingly misrepresenting their products for a long time. Does anyone really believe a word their broker or banker tells them anymore?

70 percent of the market volume is high frequency trading. That mean when you place a trade, Goldman Sachs' (et alii) super computer picks it up, front runs your trade and makes a fraction on every trade - charged to you. They do this thousands of times a day. Because they're so smart. Some day they'll be the only ones left in the market.

METHODS OF GOLD COLLECTING/INVESTING:

How to invest in gold:

Gold bullion coins are the most popular and most liquid form of bullion. They trade at a premium to the spot price which rises and falls according to a demand which is linked to the overall financial stability of the current period. Bars are cheaper, but somewhat less popular, hence they trade closer to the spot price.

Paper gold (futures, gld, cef) track the spot price, and are extremely liquid, but like all paper assets, they are subject to possible default. Paper gold during periods of high instability can also be extraordinarily volatile. 99% of gold futures contracts are never exercised. There is no question that there are far more contracts than underlying bulllion. What will happen if some large player demands delivery and the bullion isn't there?

Historical Investment coins tend to move with the overall public (collector, investor) interest in gold, though the bullion content comprises only a tiny percentage of overall value. The rest of the value depends on demand which in turn depends upon historical importance of the periods, events, and personnages depicted; as well as rarity, state of preservation, and overall beauty of the compostions, as well as the skill (and perhaps fame) of the artists who rendered them. High grade investment coins have been appreciating right through the financial crisis. Check out recent auctions.

Confiscation? During periods of great financial dislocation governments may suspend gold trading, and make illegal gold bullion ownership, as they did in 1933 during the great depression. Some feel that pre-1933 gold coins will be indemnified from such a confiscation, because of collector value. There is a thriving market in 20th century pre 1933 gold coins because of this. Certainly, historical investment coins will be indemnified because of their small bullion content and high collector value.

Gold Stocks. Gold stocks also tend to rise and fall with the price of gold. But a down market can bring stocks down regardless of gold action.

Ancients vs US coins: Test your coin IQ. Take this pop quizz at home: A top quality lincoln wheat penny in a scarce year and mint can cost 15,000 dollars. There might be 5000 of these pennies in similar condition. And it looks subatantially similar to a billion other pennies you can get at the bank for 1 penny. A top quality Julius Caesar portrait denarius can cost 15,000 dollars. There might be 30 coins in similar condition in all the world. And it looks substantially different from any other coin minted in world history. Which will be more valuable in 10 years?

BUYING! Top quality coins are rapidly disappearing from the market. I am always seeking new ancient, medieval and world high quality material. Because of low overhead I can pay top dollar. Please contact me if you are looking to sell. I am only interested in coins of the highest quality.

Resources:

To learn more about gold coin prices at auction: www.coinarchives.com

To see coins for sale in an on line coin mall: www.vcoins.com

To learn more about gold stock investing: www.midasfunds.com/gold-investing.html

To follow the ancient coin market subscribe to: The Celator magazine: Post Office Box 839
Lancaster, Pennsylvania 17608 USA, www.celator.com .

 

Glossary: (Grk) tongue

Coin: Koine (Grk): common.
Money: Hera Moneta (Lat) Hera the warning Goddess, in whose temple the Roman mint was located.
Dollar: Joachims-taller (Ger.) those of the town where silver was mined and minted into "tallers"
Cent: (Fr.) one hundred.

Shekel: (egyptian, then semitic) a unit of wieght
Stater (Grk) translation of Shekel - Hekte (Grk) sixth, Trite (Grk) Third
Nommos: (Grk) coin, law, - Nomizo: to reason
Drachm: (Grk) handful, small portion- Di (2) Tetra (four) Penta (five) Octo (eight)

Denarius: (Lat.) ten - the original division of ten Denarii to the Aureus
Aureus: (Lat) Gold
Solidus (Lat.) fine, pure, Semissis (Lat) half, Tremissis (Lat) third
Orichalcum (Grk) bronze, coin
Argentus (Grk) silver, coin
Bezant: (lat) Solidus of the Byzantine Empire

Dukat: (Lat) Dux, Ducas: Leader
Florin: (Lat) Flower, from Florence
Or: (Fr) Gold
Ecu: (Fr) shield - coat of arms
Escudo: (Sp) shield - coat of arms

 

Contact me: Jeff Kahn, PMB 280, 123 Seventh Ave, Brooklyn NY 11215. Phone: 347 517 4055
Email: Jkahn21@nyc.rr.com