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California Numismatic Investments

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A Few Notes Along The Way: Comments are welcome and thanks for reading:

1. (July 29, 2010) Avoid This IRA Ripoff Part 2 – The “bid” side of the coin market is simply what major market makers will pay for any given coin. Many of these market areas become specialized, especially if sold by large telemarketers who have the ability to buy virtually everything on the market. While this is common in the coin business it is not necessarily good because sometimes it leads to volatility in prices. I hate to place the cat among the pigeons but have warned consumers a number of times about placing proof gold eagles in their IRA accounts. Large telemarketing activity has distorted prices and abuse by a few firms could destroy your retirement savings. Recent fraud investigations concerning two large firms in the LA area is the latest saga of this sad story. The theory goes something like this: The Los Angeles DA investigates two prominent firms for overcharging uninformed customers. The public gets wind of what is going on and begins to question paying $3000 to $5000 for a proof gold eagle that can be purchased from any major dealer for $2000. Wholesalers in proof eagles stop getting orders from their big telemarketing accounts because the fraud investigation silences the phone banks and so pull their strong “bids”. This, of course, reinforces the downward price spiral of proof gold eagles. I think placing any gold in your IRA is not a good idea because it does not produce interest which can be deferred. But if you are a fanatic about this idea simply choose the bullion US Gold Eagle (small premium) and avoid the over hyped Proof US Gold Eagle (large premium) unless you are eager to make consumer comments about getting ripped off at the upcoming congressional hearings.

2. (July 27, 2010) Reporting Rules & President Obama’s Health Care Reform – It really does not take much thinking to understand the government is spending too much money. Deficit spending has become a way of Washington life but because the economy was in so much trouble perhaps citizens trusted that politicians would recognize when enough was enough. Perhaps, but this money has to be squeezed out of someone and I have always said the rich simply don’t make enough, even if you took it all, to float this boat. So Middle America and small business grab your checkbook. And there are more unsettling trends hidden within President Obama’s new health care plan which is scheduled to begin in 2012. Within this new bill the IRS plans a massive expansion of Federal Form 1099 and will tract cash transactions as low as $600! This means that virtually all precious metal or rare coin business done in cash will be recorded! And so will all $600 cash small business transactions across America! This egregious assault on business will push legitimate transactions underground and bury honest gold dealers in a paperwork maze that will raise prices to pay for compliance representatives and frustrate daily buying and selling. No wonder we are getting calls from a public that thinks the government has once again lost focus. So what to do? First remember this legislation does not become law until 2012 so we have more than a year to modify the rule in favor of small business. ICTA (Industry Council for Tangible Assets - ictaonline.org) will be an active lobby in this area but they will need your help. Contact your representatives and ask if they are intent on derailing all the jobs provided by small business in America? According to ABCNews Rich Blake (July 21, 2010) Rep. Daniel Lungren, R-Calif., has introduced legislation to repeal the section of the health bill that would trigger the new tax reporting requirement because he says its a burden on small business. Second, pass this on to others who may not know what is happening. I personally believe this craziness will be changed in time, once the public becomes aware of the danger but you never know these days so do your homework in protecting what money you may have left.

3. (July 16, 2010) The Chinese Counterfeit Threat – The problem of counterfeits in the professional coin business has always been a concern but not a big one even before certification became common. In the old days serious dealers quickly learned the most common “traps” and shared information about how these counterfeits were created and could be avoided. So professional dealers quietly protected the public and at the same time did not cause undue concern. Today with independent certification the notion of buying a counterfeit has been all but eliminated. But the modern Chinese counterfeit could be a disturbing trend. Believe it or not the Chinese government has no laws which will stop individuals within China from creating and exporting large numbers of phony coins! The first wave of these fake coins was so bad that only a beginner could be fooled. But fooled they were as hundreds of them were sold on the streets of LA to unsuspecting buyers looking for a “deal”. But the Chinese counterfeits began to improve and now are good enough to fool some dealers which should know better. So what can the consumer do to protect himself? First, don’t buy coins from amateurs on the street or in places like the Swap Meet, these are always counterfeit. Second, if you are traveling overseas avoid street merchants which offer such trash. Third, insist on grading from PCGS (The Professional Coin Grading Service) as the coin’s authenticity is always assured before the grading process begins. Believe me, this is cheap insurance against a growing rip off which will soon visit a neighborhood near you.

4. (July 16, 2010) The Goldman Sachs Gold Forecast – This out of London by Matthew Walls (Dow Jones Newswire) U.S. investment bank Goldman Sachs Group Inc. (GS: 145.22, 0, 0%) Thursday raised its 12-month forecast for gold by a modest 1.5% to $1,355 a troy ounce, citing a prolonged period of low interest rates and persistent concerns over European sovereign debt.

This forecast is interesting because it is not crazy and still optimistic considering gold is pushing all time highs. As I have before the physical product in your hand represents stability in a chaotic world and trumps relative price anytime so I would take the Goldman Sachs forecast with a grain of salt. But with all the gold bullion choices what do you think the public chooses most often? Hands down the most popular choice is the US Gold Eagle followed by the standard gold bar in various sizes. So most American buyers are not easily fooled because they recognize and buy value. If there is a lot of media coverage, and some fear in the streets, the less than $10,000 buyer rains supreme. Larger investors, say up to several hundred thousand dollars, have been regulars for years in this gold market and the headlines are not important to their financial plans. The very large plays of 1 to 10 million happen more often than you would think and are usually facilitated through 3^rd party representatives which means the folks weighing in are famous. So what does all this mean? First, in my 30 years experience there is more money floating around than I have ever seen before and for the most part the purchases are intelligent. Second, we are seeing a much wider representation of American society actively interested in gold this time around.

5. (July 12, 2010) The Real Deadwood by John Ames – My favorite stories, true or fictional, have always centered on the discovery of gold and its subsequent significance in human history. So it’s no wonder that the HBO series, Deadwood, is my all time favorite watch. The fascination with old gold coins has been intense since I was a kid and has virtually nothing to do with whether these historical items will ever make me or you a dime. In my 30 years of buying and selling and collecting these treasures perhaps half the time I was losing money and half the time I was in a profit position. So, in my opinion, if you are looking at the gold market simply from a profit motive you have missed an essential part of what makes these old coins fascinating. I enjoy owning old gold coins in their own right and their value in US dollars is secondary because they offer me some sort of American individualism that is difficult to describe on paper. It is one of the few areas left to us which does not have to be shared, through computer data base, with everyone in the world. Gold coins represent privacy in a world that has rushed so fast in the opposite direction that I can scarcely catch my breath. And with this “real” sense comes all the historical pictures of the first gold strikes. I read the book by John Ames this weekend, The Real Deadwood, and wanted to pass along something worth your time. This book, or the HBO series won’t make you rich but they might help some appreciate the historical significance of America’s real gold coinage and look beyond today’s profit or loss position.

6. (July 6, 2010) Hotel Buyers The Professional Numismatists Guild (PNG) has taken aim at Hotel Buyers! For the uninformed these are the guys that take out large format print ads in local newspapers and tell readers they pay top dollar for gold coins, jewelry, silver dollars, commemoratives, medals, diamonds, old watches and “you name it” as far as buying collectable things of value. Their name, of course, comes from the fact that they set up for a day or two in local hotels. The fact that they are here today and gone today does not provide much financial reassurance to the seller but in the days of “fast everything” they seem to fit the bill. As far as the PNG is concerned most of these guys are simply the devil in disguise and folks who sell their valuable coins and paper money for next to nothing are either not well informed or just plain stupid. But how do the prices offered by Hotel Buyers match up with say your local coin shop or coin show? Actually many Hotel Buyers are what the coin trade calls “cheap bidders” because all that print ad and travel is expensive and the seller picks up the bill. The problem with some of these folks is that they get greedy and “low ball” the public (which is trade talk for offering virtually nothing in the hope that the uniformed will simply not question the offer). These extremely low offers are actually against the law and actionable if discovered. If you sell your coin collection to the guy across the street for nothing and you later find out it was worth a great deal you have little or no legal recourse because your neighbor is not a professional. If on the other hand you sell too cheap to a Hotel Buyer and for some inexplicable reason find out you have been taken, you have grounds for a law suit because you relied on his professional opinion as to value. But most Hotel Buyers are not related to the community and do not care anyway because they are soon gone. So does this make your local coin shop a better place to sell your treasure? Actually it is a much better place to start but because all is not what is seems in any business involving the exchange of money you should be cautious and test the waters until you establish a trusting relationship with any dealer. More than one professional opinion, especially in the beginning, is probably a good idea and always remember what President Reagan said about the Russians: “Trust but verify”. Also note that I am always around for questions (RSchwary@aol.com) as to whether a price quoted was friendly or someone was just interested in robbing you.

7. (June 24, 2010) Important Platinum News For Immediate Release 24 June 2010 - CPM Group 2010 Platinum Group Metals Market Outlook: CPM Group has released its 2010 Platinum Group Metals Long-Term Outlook. The study is a comprehensive analysis of the key market fundamentals of platinum, palladium, and rhodium that are expected to influence the price of these metals through 2019. The report contains projections for mine-by-mine South African production through 2019, and provides a detailed analysis of South African, U.S., Russian, and Canadian platinum group metal mine production. The report also contains a thorough analysis of platinum group metal scrap recovery from the various end-uses of these metals. Detailed discussions are included on the major global auto markets, electronics sector, and the jewelry markets. The report also addresses the potential threats to platinum group metal fabrication demand going forward. Investment demand, an increasingly important factor influencing the price of these metals, also is discussed at length in this report. The Platinum Group Metals Long-Term Outlook provides 10-year projections of supply, demand, and prices under a base case and two alternative scenarios.

New York, NY, 24 June 2010. The outlook for platinum, palladium, and rhodium over the next 10 years seems most likely to be one of historically high prices. This outlook is supported by expectations of increased fabrication demand, constrained supplies, and rising investment demand as a result of these positive supply and demand fundamentals.

South Africa is the largest producer of platinum and rhodium and the second largest producer of palladium. Given the high degree of production concentration from South Africa, supply of these metals is very sensitive to issues related to mining in this country. Shortfall of resources such as electricity, skilled labor, and water, is expected to negatively affect supply from South Africa. Importantly, many of these issues are largely unresponsive to the metal price levels. None of these problems are expected to be resolved soon and are expected to add to production costs, which should be supportive of prices during the forecast period. The PGMs are largely produced as by-products in Russia and North America, with the exception of North American Palladium and Stillwater Mining, and therefore supply from these regions is largely influenced by the production of the primary metal, typically nickel and copper.

A growing global auto population, tightening emissions standards, and the lack of commercially viable substitutes for PGMs in auto catalysts is expected to bode well for the fabrication demand of these metals going forward. Auto catalysts are the largest source of demand for the PGMs, which has resulted in growing concerns over new technologies such as electric vehicles and nanotechnology. The report gives consideration to these trends and assesses their likely impact of PGM auto demand over the next 10 years. Demand from the electronics sector and other industrial sectors is expected to grow at a healthy pace during the forecast period.

China is the largest consumer of platinum jewelry. Populations in newly industrialized countries such as China are becoming more affluent. Chinese demand for jewelry is analyzed in the context of this trend. Investment demand has always played an important role in influencing the prices of PGMs. The compelling fundamentals resulting from constrained supplies and rising fabrication demand are expected to increase investor interest in these metals, adding to the upward trend in prices. In addition to hedge funds and wealthy individuals who typically invested in these metals, the launch of physically backed platinum and palladium exchange traded funds in 2007 has accentuated the role of this particular portion of the PGM market. The reportexplores the workings of investment demand, the drivers behind investors’ decisions about PGMs, and investment demand trends’ long-term implications for PGM market prices.

The CPM Group Platinum Group Metals Long-Term Outlook is part of a series of long-term studies of precious metals markets. These studies are used by producers for strategic planning and in the preparation of technical reports. In addition, institutional investors and physical traders supplement their internal research with CPM Group’s comprehensive analyses, conclusions, and projections. The reports also serve as authoritative reference guides for platinum group metals market statistics. CPM Group sells the reports as stand-alone products, although most clients use the CPM Group reports as parts of broader consulting packages related to the specific metals markets.

To download the full table of contents, please contact Adam Crown at (212) 785-8320 or pgm@cpmgroup.com for more information. About CPM Group:   CPM Group is a commodities research and consulting company that provides detailed research, analysis, and advisory services related to commodities markets and the financial management of exposure to commodities. CPM Group clients include major producers, processors, market intermediaries, and industrial users of commodities. Institutional investors, hedge funds, private equity funds, and family offices rely on CPM Group for accurate analyses of commodities markets, retaining CPM Group for research, analysis, and advice on managing their financial exposure to these markets. Central banks; foreign ministries; agencies involved in attracting foreign direct investment, strategic metals policies, energy and agriculture; and sovereign wealth funds draw on CPM Group’s knowledge and experiences since the 1980s in these areas. CPM Group’s services range from basic research and consulting on commodities markets to investment banking advisory work, commodities management, and asset management services.

8. (June 21, 2010) The Gold Confiscation Myth - Every time the gold market heats up the gold hustlers of telemarketer fame try the same old dodge and it goes like this: The newbie customer sees gold in the headlines, goes on the net and picks a few companies that offer “a free investor’s kit”, gets to hear how this wonderful company has been around since Moses and offers an A+ rating with the BBB. So this well meaning mark believes his friendly representative and listens carefully as he is told that buying gold is a great idea but you must avoid the common bullion coins because our Uncle Sam is just waiting to confiscate your holdings. But the large and well known A Slime Gold Company has the secret solution: “Invest in non-confiscatable gold like Swiss or French 20 Francs and you will be safe.” There are a number of holes in this all too common story: The Confiscation Myth is just that in my opinion and used extensively to “steer” the new buyer away from what he wants (bullion which produces little profit to honest dealers) into higher priced gold coin substitutes which produce the big commissions necessary to run high overhead national firms. But let me play Devil’s Advocate for a minute and suggest that even if there is a slight possibility the government is thinking about confiscation there are very legitimate and reasonable ways to protect your gold bullion investment without paying an arm and leg in trumped up broker commissions. In other words the same typically touted small gold coins are available elsewhere for significantly less money. But keep in mind that just because our government confiscated gold in the 1930’s does not mean it will today. Why? America is quite different now and much more pessimistic about its leaders. A typical response today would be to bury the stuff in the backyard and declare their gold was stolen years ago by crazy Uncle Joe. Now let’s say you are really paranoid and while you may not believe the story you want to do something to protect against this wild idea. There are a few alternatives which are not in any way proven but at least you have a story for Uncle Sam. The alternatives like pre-1933 Swiss or French 20 Francs are sold by most large bullion companies at prices similar to other small bullion coins. But the unfortunate new buyer does not do his pricing homework and believes A Slime Gold Company is quoting “fair” because they are so reliable looking. The truth is he is giving away about a 1/3 of his investment because he failed to “shop around”. Or look at it this way: The money he spent on the 100 coin lot of Swiss 20 Francs from his “friends in the gold business” would have produced 130 of the same coins at any large gold dealership nationwide. The moral here is to heavily discount any firm that leads with the confiscation issue as a selling point. Like I said, I personally don’t buy the logic here but if it is a concern to you there are plenty of ways around the problem without buying your commissioned broker a new car.

9. (June 10, 2010) Don't Get Ripped Off When Selling Your Scrap Gold - Every time the gold market heats up I get a dozen Emails about where to sell gold scrap. We at CNI do not buy scrap gold, silver, or platinum but I can provide a few valuable tips which will insure you get all the money. (1) Forget about anything you hear on TV or radio, especially with names like Cash4Gold. These are the folks that offer a free shipping kit to uninformed customers. Also avoid those small operations in strip malls operating out of stores which used to sell shoes or hotel buyers that place full page ads in local papers. Places like these pay about half of what your gold is really worth, tell you what great prices they pay and laugh at you when you walk out with your “cash”. (2) Even coin dealers are not a great place to start because this is not their primary business and therefore are sometimes cheap bidders. (3) Figure the actual gold content of your old jewelry yourself. If you don’t know how learn by asking questions regarding carat content and pure weight. (4) Figure an honest refiner will pay you somewhere between 95% and 98% of the actual melt value, minus a small processing fee of around $50. (5) Let me also suggest two firms that specialize in melting and refining scrap precious metals: They have great reputations, good checks, can be trusted and have been around for years. NTR Metals in Los Angeles, Daniel Wynn runs the place and you can reach them at (213) 489-1508 (www.ntrmetals.com) and Dillon Gage in Addisen, Texas (800) 375-4653 Dillon Gage's Assay and Refining Services.

10. (June 9, 2010) Before Selling Your Coin Collection Do A Little Homework - “My Dad had a coin collection and has since passed on giving the collection to the family. How can I be sure to get full value if we decide to sell?” It is amazing how often I get this Email so a general answer might help everyone: Most small family collections are not rare because the coins were either taken out of circulation or purchased from the local coin shops which were common 30 or 40 years ago. Buying quality coins during that period was hit or miss because there was not any independent certification and grading standards were evolving so in some cases the quality of the collection and therefore its value is a matter of good fortune. It is unlikely the collection will contain a true rarity but it is possible and there are a few signs which can give allow you to make an informed decision: (1) Do the coins show from whom they were purchased and what was paid? These type of records are important because if Dad was dealing with Harvey Stack of New York for example, a leading East Coast dealer at the time and recognized numismatic figure, the chances of having a valuable coin in your hand increases tremendously. (2) Regardless of the selling dealer do the coins appear to have been purchased for a premium when Dad was building the collection? This is important because during this time there were few rarities still in circulation. So by inference if he did not pay a big premium he must have just saved what came his way so the chances of having the key dates are smaller. This is not to say the collection is not valuable, it could be but chances are its value comes from its silver and gold content, not its collectable value. (3) Purchase a copy of A Guide Book of United States Coins by R.S. Yeoman; it is available from any bookstore for about $15. Lay out the collection and see if you can match your coins to the examples shown in the book by date and mint mark. There is really a lot more to this but this important step will give you a sense of what is valuable and what is not. (4) Finally take your treasure to more than one coin dealer and shop around before selling anything. This is important because while I believe there are more honest dealers than not, you could run into the wrong person and get killed (this is trade talk for selling your valuable coins for much less than they are worth). While all of this may sound daunting it can be a lot of fun and if you need help call me for a fast answer (1-800-225-7531) or Email a list of what you have and the prices offered and I can see if you are being treated fairly. Good luck and let’s hope your old coffee can contains one of the missing 1894 S Barber Dimes. The Mint struck 24 at the time and only about half are accounted for…the price tag for one of these in excellent condition could be well over a million dollars!