Where to Start When You Want to Buy Gold
By Dr. Steve Sjuggerud
November 14, 2008
"You think people were surprised when gold hit $1,000 an ounce," a legendary investor told me this week. "Wait 'til they see $5,000."
As we talked, this investor could hardly hold back his enthusiasm. You see, he has spent his career finding crises, then buying assets at the height of panic.
Normally, he does this far away from Wall Street in emerging markets. And he's done it many times in his career. But now, for the first time, he's thinking about coming to the States.
Most Americans wonder what will happen next. They have never seen anything like this before. But my friend has seen it many times. He explained it simply:
"In crisis, banks want safety," he told me. "So they get rid of potentially nonperforming assets at any price. They don't care what they get, or how much they lose on a property, for example... They just want to get it off their books."
Having seen this many times in emerging markets, my friend is convinced the Great Inflation is coming to the States in the next few years. The last time we saw double-digit inflation was in 1981. It could get even worse this time around. "It's already happening," he says, pointing to the U.S. money supply figures, which have shot up over the last few months. "It will just take time to ignite."
My friend is buying gold. One of his holdings is 100-year-old gold coins. He has many millions of dollars worth of them. He has personally experienced bank closures and currency revaluations, which have nearly bankrupted some of his businesses.
So he owns physical gold. This is not like money in the bank. The government can easily seize your bank account... or devalue your currency... or confiscate your retirement account (which just happened in Argentina). It's much more difficult for a government to mess with your physical gold – if it can even find it.
For years now, I have been recommending 100-year-old gold coins. The price of gold has more than doubled since I started recommending them. And so have the prices of these gold coins.
It's not too late to buy. Relative to their meltdown values, rare coins are cheap. But I don't think that's going to be true for long...
People are finally catching on to the idea of holding physical gold. Plain gold bars and "bullion" gold coins (coins that don't have value as a collector's item), which should sell close to melt value, are in short supply. You either won't be able to buy them at all... or you'll have to pay an outrageous price for delivery at some undefined date.
Gold dealer Kitco has stopped selling 18 types of silver and gold bullion coins and bars. The company's not even sure how long it's going to take to fill orders that are already in. And bullion gold, which is only worth its melt value, is now selling at premiums not seen since Y2K caused a market panic.
So I much prefer the rare gold coins... the 100-year-old ones in near mint condition. With bullion, you only make money if gold goes up. But with rare gold, you can make money two ways... if gold goes up and if the "collector's premium" over melt value goes up.
I've heard from a lot of readers who don't know how to start investing in gold coins. Professional Coin Grading Service has a website with lots of information, including a link to www.coinfacts.com, which is a good starting point. If you want a book, Coin Collecting for Dummies is actually a good starting place, even if you don't think of yourself as a collector.
I am comfortable pointing you in the direction of a few honest dealers, who have taken good care of my subscribers for many years. Van Simmons, in particular, is a mentor of mine (www.davidhall.com). Dana Samuelson and his team (www.amergold.com) have done my readers right for years as well, as have Michael, Glenn, and Rich at Asset Strategies (www.assetstrategies.com).
The Great Inflation is coming, my friend says. And he knows better than anyone. He believes gold could hit $5,000. So as a part of his portfolio of assets, he owns millions of dollars of 100-year-old gold coins.
"People told me I was crazy when I was buying them," he told me. "But the gold was mine, outside of any bank. And now I've made triple-digit profits."
My friend believes this is just the beginning for gold. Do you have some gold, or gold coins, in your portfolio? Maybe you should...
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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NOW COMES THE SANDPAPER FOR FINANCIAL STOCKS
Another month, another new low for the financial sector.
You can see this new low in today's chart of the iShares Financial ETF (IYF). This popular fund holds the "biggies" of finance... like Goldman Sachs, American Express, Citigroup, and JPMorgan Chase. On Wednesday, the IYF settled 63% below its 2007 high.
We've heard many investors claim financials are now the place to be. After all, the sector has been beaten down so badly, shouldn't it be due for a new run higher? Maybe... but these folks are ignoring the guillotine and the sandpaper phenomenon.
When a big investment bubble collapses, it takes years – not months – to clear out the deadwood and bad investments. First is the guillotine: the quick selloff that lasts six to 12 months. Then comes the sandpaper: the years and years of small rallies and sideways trading. After years of frustration and misery, folks finally dump their shares in disgust. Only then can a new bull market begin.
Our caution to investors seeing "value" in financials... you may catch a few good trades or a few unusual winners in this sector. But the odds are heavily stacked against a long-term investment. The sandpaper stage lies ahead...
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The nation's largest public pension fund, known as Calpers, is paying dearly for its ill-fated decision to become one of the most aggressive real-estate investors among public pensions.
Amid the rapid decline in the housing market, the value of Calpers's investments in land and housing projects across the country had fallen 35%, to about $6 billion, as of June 30, according to recent performance results released Wednesday by the California Public Employees' Retirement System.
The losses are likely to be larger now because the values were based on appraisals completed at the end of March. Since then, land values have cratered nationwide, as evidenced by the bankruptcy-protection filing of one high-profile Calpers undertaking, the LandSource land venture in California. An investment vehicle funded by Calpers sank $970 million in that venture, which holds 15,000 acres outside Los Angeles.
After starting as relatively modest investments in land in California in the wake of the real-estate collapse of the 1990s, Calpers's land investments ballooned across the nation and today total 288,000 house lots in 20 states.
Undeveloped land is arguably the riskiest real-estate investment because values can drop significantly when home building slows. |
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Retail gasoline prices dipped for a 17th week since July 4, falling below $2 a gallon in a number of states and approaching $1.50 at some service stations.
While consumers, worried about a weak job market and slumping investments, are grateful for the price relief, economic reports increasingly suggest they're hanging onto whatever savings they see at the pump.
Oil prices hit a 20-month low Tuesday as Wall Street offered yet more evidence that consumers have gone into hiding.
Retail gasoline prices fell overnight to a national average of $2.22 a gallon, dragged down by the falling price of crude, which now costs 60 percent less per barrel than it did in mid-July. The average price for regular unleaded gasoline has fallen nearly 32 percent in the last month. |
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