If you had $2100 to spend today...

[kbsig106]

Ok, I'm at a crossroad and not sure what direction to go with a purchase for investment purposes - if you had just over $2K to spend on modern gold/silver, what would be a good course of action?

 

four 1/4 AGE Proof 2010's & two 1/10's AGE Proof 2010's - then graded ER by NGC

 

or

 

an assortment of 2010 Australia Kangroo Gold .9999 1/2's and 1/4's - grade afterwards?

 

or

 

same as above, just a little less and throw in a 2011 25 roll Canada Silver Wolf Silver $1 - grade afterwards?

 

or something else totally different?

Spent most of the weekend thrying to think of which direction to go and thought to seek out some advice. My intention is to hold for long term but you know how things can change with the wind.

 

Thanks in advance!

 

[physics-fan3.14]

If you are going to buy gold/silver for bullion, I personally would recommend classic gold. A St. Gaudens or something like that would be far more interesting, even if the modern AGE is based on the same design.

[kbsig106]

If you are going to buy gold/silver for bullion, I personally would recommend classic gold. A St. Gaudens or something like that would be far more interesting, even if the modern AGE is based on the same design.

 

I would go for a calssic design gold piece, but I'm looking for a little more quantity which is harder to achieve in that category. I didn't want to go and buy the paper gold/silver ETF(s), which leads to the reason why I was looking at modern bullion as an alternative.

 

Classic would be good if I could aquire a selection in graded condition - I do not want to roll the dice with ungraded classic (bad expirence with two $2.5G Indians in the past).

 

Thanks Physics-fan

 

 

[bsshog40]

If I didn't have to pay bills with it and I wanted Gold, I would also go with a graded classic gold. Bullion prices are up but I still think that classic gold would hold more value than just bullion. I'm not familiar with the gold market but this would be just my personal opinion.

[kbsig106]

If I didn't have to pay bills with it and I wanted Gold, I would also go with a graded classic gold. Bullion prices are up but I still think that classic gold would hold more value than just bullion. I'm not familiar with the gold market but this would be just my personal opinion.

 

I've got a article on undervalued classic gold from about a year ago, I'll see if I can dig it up. I just don't want to settle on one coin though.

 

 

[TomB]

I would not have any of them graded. If you want the most bang for the buck in terms of metal content on modern pieces then you may want to purchase modern $5 gold commems off of ebay in their original government packaging since these can be had at essentially melt if you have a little patience and are the traditional US 90% gold content. Larger size gold might be purchased as one ounce bullion AGEs or Buffalo issues, but keep in mind the AGEs are at 0.9167 fine and the Buffalo issues are 0.9999 fine. I would also add silver and you will generally pay a premium for ASEs and this premium is not refunded if you sell to a dealer, in my experience. However, again if you want to purchase 90% silver coinage rolls you an often find things such as 1964 JFK halves at little over bullion.

[kbsig106]

I have noticed in passing the $5 modern comm.'s can be picked up close to melt, but didn't think that much more in to them. Thanks for the suggestion, I'll re-check.

 

[Dcoin]

I love the idea of the silver wolf coins. I've seen them around a lot and they always carry a nice premium. If you can get them close to melt I think its a great addition to your other purchases.

[World Colonial]

You are going to need to make up your mind whether you are more interested in bullion (aka, "investing") or collectible coins, which I might add, are BOTH a form of speculation. Because unfortunately, $2100 does not stretch very far with any of the options discussed here.

 

Personally, I would stick to either bullion or coins that are reasonably liquid which sell for as low a premium as possible. Modern US commemorative gold, AGE or ASE business strikes or equivalent fit this description.

 

Obscure foreign gold coins and silver rounds from a name brand with weak name recognition do not fit this description other than to make it easier for the seller of this material to unload their inventory.

[Hard Times]

If I were going to spend $2100 on gold, I would be looking at the rarest 19th century specimen I could find that was properly graded, original, and in AU grade. Why on Earth would one want to buy a modern, common, bullion coin right now, unless you want to turn it over pdq and play it like a short term trade on a stock? History tells us we are in a silver and gold bubble. Remember the run up for dot.com stocks? Remember what got us into the current economic mess? That's right, the housing bubble - overvalued real estate where the powers that be with all of the resources were able to con the uneducated into buying overvalued real estate with loans that could not be paid back! Bullion prices have run-up to ridiculous levels, it will come down, the only question is when. Keep in mind the bell-shaped curve versus a steady increase over the long-term.....

 

 

So, do you want to spend your money on bullion with the high risk involved? Instead, if you are looking to invest, buy rare 19th century coins and HOLD for the long term, or be conservative and buy bonds - amazingly, bonds are doing quite well right now, and over the past decade, the right bond funds have done 7 to 10% per year! The SP500? Flat. But gold has run up like mad over the past two years in the economy panic, and when the economy does turn around, which it is bound to, it will run down, that is how the market works. Bullion buyers will be holding losses that can't be recovered for probably a decade or more, unless they can get out when the crash starts. But timing the market is always tough, and those companies with the computers that trade in milliseconds with complex market predicting software are going to beat the private investor every time when market timing is crucial to make a buck.

 

But don't believe me on the bullion bubble, after all, there are those 'experts' out there telling us the world is going to end so tie up your money in bullion, and guess what? These 'experts' just happen to have the bullion to sell you........

 

On the other hand, put your money into modern bullion - leave the nice 19th century specimens alone so it will be less expensive to buy them when you bullion folks aren't in the market for them.

[kbsig106]

Thanks to all - this is exactly why I asked. Wanted to make a move and just could not decide which direction to go. The usual focus for me is the small sized $2 and $5 FRN's, but I'm staying away from most paper right now even though some are at idea prices.

 

The classic angle is what most interests me - I had a partial type set in 2008/09 w/ a $2.5, $5 and $10 but sold out during the run up.

[jtryka]

No offense hard times, but Bonds are in a much scarier bubble right now than gold or silver! Why would anyone in their right mind lock in a fixed income investment guaranteed to pay you less than inflation? Unless you really don't believe Ben Bernanke wants to start printing more money! Personally, I think we will be in a massive gold bubble when the average person on the street is buying, but that's not happening right now. In my office of 25 people, do you know how many people are buying gold or silver? Three (3) which includes me, and 2 other guys that I introduced to the hobby. So that's 12%, how many were buying tech stocks in 1999? I guess is that at that time I was maybe the only one that wasn't! But at any rate, when everyone is buying and the Dow/Gold ratio is near 1.0, then I'll be dumping.

 

As for the original question, I would buy some mid-grade common date liberty eagles and half eagles, below MS-63, they generally trade in line with bullion but are much more interesting. Maybe even try for a nice classic head half and quarter eagle in XF/AU, though that might be a little more risky since there are not many collectors of Classic Head gold, so you'd pay a premium that might not translate into as much upside.

[michael]

Ok, I'm at a crossroad and not sure what direction to go with a purchase for investment purposes - if you had just over $2K to spend on modern gold/silver, what would be a good course of action?

 

put all into raw unslabbed american silver eagles any years as close to current melt (the day i am buying them) as i could get them

[World Colonial]

Given that I expect a deflationary depression in the near future, I agree with you that bullion is going to lose value (my opinion is for several years) even though I do not think it is particularly overpriced at current levels.

 

But where my opinion might differ from yours is that I believe that to the extent bullion is overpriced, coins are even more overpriced, a lot more. I do not follow most coin prices that closely and no one can since there are so many of them. And possibly, the "value proposition" for many coins versus bullion has improved the last few years. If it has, it's probably because the capacity of the typical collector to pay more or even hold on to what they had or have has decreased which in turn means that bullion has outperformed them.

 

If bullion falls as I expect it will, I expect most coins to lose more value, no matter how reasonably priced they appear to be now to most people. Coins are a luxury item and collectible or a form of speculation (aka, "investment") which no one needs for any purpose at all. In good times, more people can afford or choose to buy them and pay more. But in bad times, they cannot.

 

The other consideration is individual circumstances. I expect many people to become forced sellers under the economic outlook that I have, which will either be worse or much worse than 2008.

 

[Hard Times]

No offense hard times, but Bonds are in a much scarier bubble right now than gold or silver! Why would anyone in their right mind lock in a fixed income investment guaranteed to pay you less than inflation? Unless you really don't believe Ben Bernanke wants to start printing more money! Personally, I think we will be in a massive gold bubble when the average person on the street is buying, but that's not happening right now. In my office of 25 people, do you know how many people are buying gold or silver? Three (3) which includes me, and 2 other guys that I introduced to the hobby. So that's 12%, how many were buying tech stocks in 1999? I guess is that at that time I was maybe the only one that wasn't! But at any rate, when everyone is buying and the Dow/Gold ratio is near 1.0, then I'll be dumping.

 

As for the original question, I would buy some mid-grade common date liberty eagles and half eagles, below MS-63, they generally trade in line with bullion but are much more interesting. Maybe even try for a nice classic head half and quarter eagle in XF/AU, though that might be a little more risky since there are not many collectors of Classic Head gold, so you'd pay a premium that might not translate into as much upside.

 

Bonds give stability, they don't go up much, they don't lose alot of money, even in a bubble crash for bonds, unless the fed govt completely tanks, if that happens, nothing is of monetary value any more any way. Bonds don't beat inflation? What has over the past decade in the stock market? Do you know what a TIP is? If so, then you know you have a bond that beats inflation, by definition. Having said that, over the last decade, take at look at the performance of the best bond funds and the bond indexes - they have yielded 7 to 9% over that period, per year. What else has yielded this over the last decade? I am not saying that one should have all of their money in bonds, but it should be an important component, bullion gold, right now, it a total scam, a bandwagon, whatever you want to call it, don't buy now, the price is too high. If you haven't bought pre-2008, you are now buying at an inflated bubble price. No way around that. I will wait a few years before I buy double eagles again, unless they have numismatic value well over bullion value. But again, everybody bought into the housing bubble also, people just don't play it conservative with their hard earned money, which is why the world and in particular, this country, is in very serious financial trouble..........

[Hard Times]

Let me add, I see 100s of commercials and adds a month with the message 'Buy Gold, the economy is going under, woe is me!'. Now tell me, why do you think the price has gone up so fast? Manipulation of the masses, scare them, and those brokers that flip the gold are making a killing. Those buying small quantities of bullion won't. Simple as that. Market manipulation using the supposedly bad economy as a scare tactic to overvalue a commodity. Most everyone will lose, a few will make a killing..... Dot.com all over again. I paid my tuition in that one, won't panic again and devalue my assets by buying bullion right now.

[jtryka]

No offense hard times, but Bonds are in a much scarier bubble right now than gold or silver! Why would anyone in their right mind lock in a fixed income investment guaranteed to pay you less than inflation? Unless you really don't believe Ben Bernanke wants to start printing more money! Personally, I think we will be in a massive gold bubble when the average person on the street is buying, but that's not happening right now. In my office of 25 people, do you know how many people are buying gold or silver? Three (3) which includes me, and 2 other guys that I introduced to the hobby. So that's 12%, how many were buying tech stocks in 1999? I guess is that at that time I was maybe the only one that wasn't! But at any rate, when everyone is buying and the Dow/Gold ratio is near 1.0, then I'll be dumping.

 

As for the original question, I would buy some mid-grade common date liberty eagles and half eagles, below MS-63, they generally trade in line with bullion but are much more interesting. Maybe even try for a nice classic head half and quarter eagle in XF/AU, though that might be a little more risky since there are not many collectors of Classic Head gold, so you'd pay a premium that might not translate into as much upside.

 

Bonds give stability, they don't go up much, they don't lose alot of money, even in a bubble crash for bonds, unless the fed govt completely tanks, if that happens, nothing is of monetary value any more any way. Bonds don't beat inflation? What has over the past decade in the stock market? Do you know what a TIP is? If so, then you know you have a bond that beats inflation, by definition. Having said that, over the last decade, take at look at the performance of the best bond funds and the bond indexes - they have yielded 7 to 9% over that period, per year. What else has yielded this over the last decade? I am not saying that one should have all of their money in bonds, but it should be an important component, bullion gold, right now, it a total scam, a bandwagon, whatever you want to call it, don't buy now, the price is too high. If you haven't bought pre-2008, you are now buying at an inflated bubble price. No way around that. I will wait a few years before I buy double eagles again, unless they have numismatic value well over bullion value. But again, everybody bought into the housing bubble also, people just don't play it conservative with their hard earned money, which is why the world and in particular, this country, is in very serious financial trouble..........

 

I think you are missing the inverse relationship between price and yield. The reason bond funds have done so well over the last few years is that yields dropped from highs in the 6-7% range to their current levels under 3% (I am talking about the 10-year). When rates drop, bond prices rise, thus you get bond funds yielding 7-9% when actual rates on government bond have not been near that level since 1988. Funny thing about that inverse relationship between price and yield, when yields reach their lower limit (and admittedly, the 10-year currently yielding 2.43% could still go down another 243 bps) there is only one direction to go! When 10-years yield near 0%, the best you can hope for is that yields stay at 0 and you hold to maturity, then you only lose purchasing power. If yields go up, back to 2% or heaven forbid to the 5% we had in the summer of 2007, you will be in a world of hurt on the price of those bonds.

 

TIPS might actually be a viable alternative, however you need to be sure that your living expenses line up pretty closely with the CPI that is used for indexing, and then you have to consider the tax implications of the increase in principal value tied to the increase in inflation (you get taxed on the interest Uncle Sam pays you as well as the interest that he just notes on your bond, paid once, taxed twice, seems like something a lot of people might not enjoy). You also need to consider that the inflation protection for TIPS applies only to the principal, not to the interest rate, so since it's still a fixed rate you are still subject to that darn inverse relationship between price and yield if you don't hold till maturity. It's likely not as volatile as the standard bond with no inflation protection, but you shouldn't believe TIPS offer total protection from inflation. In any case, I'd probably go with them before any other bonds, or just keep putting my savings into gold until the real bubble occurs.

[World Colonial]

I do not believe that US (or equivalent) government bonds are in a bubble now but I would not be a buyer of them except on the short end of the yield curve, T-Bills. I'm not expecting their prices to crash just yet because I believe for the foreseeable future, that the government can manage as it is now. How long "foreseeable future" is, I do not know but I would say no less than a few more years. But with yields of about 2.50% for the 10/yr and less than 1% for the 5 and 2 year (36bp a few days ago for the latter), they still represent absolutely awful value on a risk-reward basis.

 

Other (non-government) bonds are a different story. There is absolutely a bubble in junk (aka, "high yield") debt and I absolutely would not be caught dead buying this at anywhere near today's prices. If anyone on this board has owned them and made good money, good for you. But I would sell them now and early to beat the last minute rush.

[kbsig106]

I'm up to my ears in TIPS - been buying an indexed TIPS fund since 2006 and the return right now is 9.21%. Another is Treasure Island Royalty Trust (TISDZ) which owns lease blocks in the Gulf of Mexico - currently they are drilling Blackbeard East, Blackbeard West and Lafitte - the Trust will pay off the top 1.25% of the gross sales of all oil/gas that eventaully comes out of the lease blocks. More of a long term lotto ticket - in at .05 cents in 2002 and currently at $2.25 per share.

 

 

How about a different direction - complete my $1 Morgan set and look for decent NGC graded Morgans? Some I have purchased in the past have been solid buys and others are common dates/mint marks. I have not been disappointed with the coins holding their value both better dates and the common ones. I'm half way through the set, so 14 coins is attainable.

 

Thanks for the comments - I can see there is a varried approach to this question.

 

 

Best Regards!

 

[BillJones]

Buying bullion oriented gold coins all depends upon what you think the future price of gold billion will be. If you think that we are headed for long term drop in the value of the U.S. dollar and serious inflation, the gold price probably will continue to rise. But if we have a repeat of the late ‘70s and early ‘80s, gold could go back to $300 or $500 bucks an ounce, and you will out of luck.

 

I don’t know the future, but the election in a few weeks could provide some clues. If we continue in the present direction, I don’t see unemployment getting any better, and I don’t see any real improvement in the economy. Regardless of what the spin doctors say, this is the longest recession since the 1930s, and as it was in the 1930s government policies and threats of more taxes and regulation have prolonged it. When you have more than 10% of the productive population out of work, the economy will not grow, and bellwethers like housing, autos and consumer confidence will continue to be low.

 

For my own finances, I’m just trying to preserve capital. I’m going with short term CDs even though they pay squat. I’m still buying coins, but for enjoyment, not investment. Maybe the smart money is selling their collectors’ items because we are told that the young people aren’t collectors. I enjoy my collection too much to part with it.

 

If you want to invest in gold, I’d look at the pieces that have lowest premiums over melt. I sort of like the idea of buying modern commemorative coins at close to melt if you can find someone who will sell them to you. Who knows? Maybe in the next decade or so demand might develop for them. If you not, you still have melt value.

 

[Hard Times]

 

Tryka, while everything you say above in your last post is absolutely correct, I disagree with your reasoning as to why bonds and TIPS are not excellent investments. In Hard Times, when stocks don't perform, bonds and TIPS preserve capital and even give a steady increase. Reality is, we have been in Hard Times for the stock market since the dot.com crash - the SP500 is flat for a decade! Now in Hard Times, unless you get in at the bottom for boom/bust investments like gold, you won't make much money and you will take on alot of risk on your capital. But, in Hard Times, the conservative approach is to preserve capital. Until the last decade, stocks did 11% long-term, bonds have consistently been around 7%. While I recommend balance between stocks, bonds, cash, and numismatics items (not bullion), given the performance of stocks for the past decade, I will take 7% on bonds any day of the week. I would be thrilled if I could get 7% on stocks over the next 20 years, but reality is, Hard Times are going to continue. But, we will have some boom periods in the economy, gold will crash during those times. Why buy bullion unless you can flip it for a small amount of profit? You should not. BTW, Long-term AAA bonds, and Emerging Market bonds, have both done better than 10% for the last couple years. TIPS as mentioned in a previous post, have yielded similar.

 

Bill Jones is right in what he says. But numismatic items because you enjoy them. Also, the unemployment rate will never go back down to 5% which is what we were used to. Most of the rest of the world has been having 10% for decades, now we are there because our rich companies have exported jobs to cheaper labor markets. They aren't coming back, we will have to adjust to the new reality.

 

But don't buy bullion now, it is exploding on an exponential curve, and it is going to come down hard, the only question is, when.

[jtryka]

Hard Times, I agree, but when you say "bonds and TIPS preserve capital and even give a steady increase" you miss the most important phrase, this is true ONLY IF YOU HOLD TO MATURITY! If you bought a 10-year treasury in 1976 yielding 6 7/8% and held it until it matured at the end of 1986, you had a nice coupon and did not lose any principal. But if you had an unexpected expense and had to sell that bond to raise cash in June of 1982 when rates were at 14.3%, I guarantee you would have lost money. That's the point.

 

Just like you say, if you bought gold at the peak in 1980 and sold it any time between 1980 and 2008 when it finally made a new high, you would have lost money. That is absolutely true, But if you bought it 9 months earlier in 1979 at say $260, you wouldn't have lost a dime during that whole time unless you had the worst luck in the world, or you were Gordon Brown. You are assuming that the current price of $1375 is the exact parallel to January 1980's price of 850, my view is different, I think today's price will end up looking a lot more like October of 1979 when it was $300. Was $300 high? Sure compared to the $100 price in 1973, the same way $1375 is high compared to the $300 price 10 years ago! Was $300 the peak in 1979? Nope. Will $1375 be the peak now? You say yes, I disagree.

[World Colonial]

The performance of long term bonds is not due to their coupon but the fall in interest rates. With long term "high quality" bonds, the drop in yields is far closer to ending than starting. US government bonds have been in a bull market for almost 30 years. Though I do not expect rates to rise significantly in the near future (which by the way, has nothing to do with the FRB), those who are long term buyers now will almost certainly lose money and maybe big money.

 

Emerging market bonds I do not follow but because there are so many of them, selectivity needs to be applied. Some people think they are safe because they expect the USD to collapse from here and because many of these countries are now running trade surpluses. On the USD, I still expect it to soar first before the collapse that others expect happens later.

 

And since I still expect another financial crisis, I also expect those who think that most debt is safe to be in for a huge surprise. I expect credit spreads to absolutely soar on lower quality debt which by the time the bear market is over, is going to be most of them. Many issuers will default outright.

 

As for gold, everyone should own at least some of it (yes, even though I think the price will fall) because it is still real money, no matter what the supporters of fiat currency say to the contrary.

[Hard Times]

Tryka and WC, good points all, bottom line is to be balanced in investments and to cost average. I never said what the peak for gold is, just that it has been on an exponentially rising curve these past two years, that is always meant 'bubble' and crash at some point. Gold could go up to $5K for all I know, but the question is, where will gold be in 10 years? I look at the long term.

 

Don't buy TIPS or bonds directly, but in funds, so one doesn't have to hold anything long term for it to mature, the fund has to do this. Having said that, consider all investments long term, 10 years or more and things cost average out, you miss the highs but you miss the low. How do you think Warren Buffett got to where he is? Buying gold on an exponential curve? Fat chance.

[World Colonial]

Even though I expect gold to fall now, I expect it to be much higher in 10 years or at least within the next 10 years than it is now. But the exponential rise you mention is absolutely one of the reasons I expect the price to fall now. Taking a look at silver, it has risen parabolically from about $17 or just above it in the last few months. There are only two other times that I can recall when this happened. The first is in 1979/1980 and the second in May 2008. Both ended badly and I expect the same outcome this time. Even if prices do not fall first as far as I expect (below $8.39), at the very least they should return to the beginning of this latest move.

 

I'm not interested in buying bonds or stocks in a managed mutual fund at all. With bonds, at least if you buy them yourself, you know that you can hold them to maturity if you have to if you are wrong on the interest rate trend. Sure, in theory the fund manager should do a better job but then I have a low opinion of the typical fund manager. There are thousands of them today and there simply are not enough good ones in my opinion. The vast majority are mediocre and I would rather trust in my own judgment.

 

Another problem with managed bond (or stock) funds is that you never know what is in there except at best when you get the reports. Since the primary goal of EVERY fund manager is to maximize assets under management in order to maximize fees, they are incentivized to reach for "yield" which means either going up the risk or maturity curves, especially the first one in a managed fund for something like emerging market bonds. Or, they might also use leverage. When prices for almost everything crashed in late 2008, there must have been many people who were baffled how their holdings could do even worse than the dismal performance of their benchmark. Aside from awful timing, this is why.

 

With stocks, its the same thing. If I were a buyer of stocks today, I would choose them myself by using a methodology such as the Value Line Investment Survey.

 

As for "buying and holding" and what I term conventional diversification, I do not believe in either of them. Every individual has to make a decision one way or the other - holding is a decision not to sell - so you might as well make it conciously and explicitly.

 

The same applies to choosing asset classes. While I would not place all of my money in a single stock, I would place most or all of them in a particular asset class depending upon its price and my circumstances at the time. Everyone already does that when they own "cash" which in the US means USD in short term debt instruments. So yes, I would consider buying other foreign currencies, bonds, stocks or metals with most of my money (the vast majority) IF the prices were "reasonable".

 

The problem today is, like late 2007, prices for the vast majority of assets are not reasonable. There is a MANIA today (yes again for a THIRD time in the last 10 years) even though its smaller than the last two. And the cause is the same as the last two, credit and debt. I expect the same outcome except that it should be even worse because people have been conditioned by their RECENT experience to sell just as they were conditioned to "buy the dips" during the bubble. Another reason is that I expect a LOT more involuntary selling because the financial position of many has deteriorated badly during this time.

 

In selecting asset classes, every one needs to evaluated and selected or rejected on its merits at that time. To paraphrase a well know proverb, there is a time to buy and a time to sell, a time to short and a time to cover, a time to hold and a time to avoid, every position has its place under the sun, at one time or another.

[Hard Times]

WC, your investment wisdom is impressive. Only point I would add is that there are some 5 star rated managed funds out there that can do quite well for the investor that can't spend significant time managing investments theirselves. Sadly, I am in the latter category.....