An expose’ of the Pirates of the precious-metals underworld and how you can truly protect your ass-ets – from them!

What you about to read is excerpted from a a series of emails, which I began to receive on the evening of January 18, 2006. Due to another lengthy e-mail exchange, which has took place over during October of 2007, and we chose many years ago to re-post this lengthy column – hoping to save others from similar fates.

If you are not familiar with gold and silver or the so-called “Rare Coin” market (which is loosely aligned with it), nor some of the reasons why these goods are sought after all over the world, then this column will have little meaning to you, however it is our intent to educate you as to the pitfalls of what some call, ”the Industry.” What follows his inquiry, was my response to him. – J.B.

Ladies and Gentlemen:
My spouse and I are about to become first time investors in investment grade coins (IGC). We’ve researched various websites and must ask in what manner do you arrive at the MS grade of your IGC’s. It’s our understanding that IGC’s are generally scaled starting at MS65 and higher, which is why we pose this question.

Also, have we overlooked your daily prices for gold and silver coins on your website? Or does one get this info solely by telephone?

Should there be a financial crisis, i.e., collapse of the U.S. dollar, how would the owner of IGC’s redeem them for services, goods, etc.? It’s our thinking that IGC’s could become a high end means of bartering when considering the fact that financial institutions might not be available to transact the sale of gold to paper money. Yes? No?

Lastly, do you sell IGC’s via credit or debit card accounts?

Thanks in advance for your response.

Good Evening Sir and thank you for your inquiry.

You have opened up an interesting can of worms here, so please bear with me.

The first thing I will say is “buyer beware.” The “IGC” (Investment Grade Coin) or Certified “Rare Coin Market” is a relatively thinly capitalized market, which has been abused by many an unscrupulous dealer over the past quarter century and unfortunately – it is the buyer, who is usually being abused. More on this topic momentarily.

As for daily prices on our website, you’ll note that most of the coins represented are fairly generic in nature, historic in value but not what I would refer to as investment quality – other than investment for security against a faltering economy. Given the current financial situation our country finds itself in – what better time to address our financial foundation – hence, what you see on our website. Prices change on a moment-to-moment basis and we can ill afford the necessary computer software, which would automatically adjust the prices with the changes in “spot” gold or silver.

As I conduct business with each client in order to meet their specific needs, prices are locked in at the time of sale at the prevailing rate. However, at our firm, we offer a fairly simple procedure, which no one in the industry will offer: on fractional, International gold specimens, your cost will range between three and ten percent above our cost, depending on the item and the volume purchased. Our cost on those coins currently ranges between $3.50 and $6.00 over “melt” value with a few exceptions.

As to your question as to how we arrive at the MS grade of the coins, which we offer; that question would not apply to the coins mentioned in the previous paragraph, although most of those have never been placed into circulation and all of them were minted prior to 1933 – making them at least, historic in value. Your question would however apply to what you refer to as IGC’s. These would be “investment” grade coins, each of which will have been graded by a third-party, independent, professional grading service, such as PCGS (Professional Coin Grading Service), NGC (Numismatic Guarantee corporation) or IGC – each recognized as standard bearers within the industry.

In theory, the reference to MS-65 or higher being considered to be the most desirable is generally true – however that does not mean that any MS-65 or higher will even be that desirable. If the supply is extremely low and there is no market for that item – then you have just become the “collector” – for you may never recover your investment. Also, one must understand, that just because an MS-65 or MS-66 has been awarded that lofty level (certainly not the highest) no longer means that it will “perform” well. A common coin – no matter the grade – is still a common coin and yet what you may be able to purchase that coin for, may well position you for a pleasant surprise in the not too distant future. In order to better understand this, please allow me to give you a little homework assignment before we speak. Based upon your comments and question, I assume that you have been speaking with some other firms. I have no problem with this as it can give you an eye-opening education.

Homework – Part 1: Contact at least 3 firms of whom you may be familiar. They may be firms with whom you have spoken with or found on the internet. Ask of their current price on a common date, Certified (slabbed/ graded) MS-66 Saint Gaudins $20 Double Eagle. Tell them that you are considering purchasing a number of them.

Now, let’s see what kind of quotes you get. I can guarantee you that several or all of them will be (as of 01/19/06) in the $3,595.00 range. You may find slightly lower prices if you really push – but the standard in the industry for a specimen of this caliber is a 40% markup. Unacceptable in any industry in my estimation – and that does not just apply to the higher grade coins – and now you see where the “abuse” comes in.

Glowing promises will be made of how, “This coin once sold for “x” and today, with the current market conditions, they are poised for dramatic movement once more. Historically, when gold doubles in value, these coins gain at least three to four times.” I am sorry sir – gold HAS doubled in the past five years – and the certified, high-grade coin market has remained relatively flat. Yes, there have been gains – but nothing like those promised.

Homework – Part 2: Pick up the phone and call me and I’ll then tell you what our firm offers those very coins for. You will be shocked at the difference. It is your money and you want the best value for it. I will provide that.

I would like both you and your wife to understand that I am not against, what you call IGC’s – I am just aghast at the hundreds of thousands of novices, who are taken – or bilked – out of millions of dollars every year because of the hype of some slicky-boy who sits on the phone and “sells” – yes – “SELLS” you a product, which he/she knows nothing about – just because some “recruiter” he/she met at a bar told him how much money they could make as a “broker” in the “rare coin business.”

Personal History: I will be fifty-eight in February (2006). When I was ten years old, my grandfather sat me down in a bank vault and gave me quite a lesson in the history of money. On that very day, I began to purchase old silver dollars out of a bag in that bank vault – you could still do that in 1958 – when our money was still real. I paid a paper dollar for a silver dollar. I asked him why we were doing this, and he said, “Son, one day they will take the silver out of our money in the same manner that that son-of-a-bitch Roosevelt did with our gold in 1933” Six years later Gramps was proven to be correct.

By age twelve, he began to take me to coin auctions and estate sales, whereupon I began to purchase a few small, moderate gold coins. As you may recall, few people were able to own gold back then – other than in the form of jewelry or coin collections. Many who owned gold coins were still scared to death of the ghost of FDR and his gold-grabbing cohorts – but true coin collectors knew what the rules were and what they could legally own. It was those people, who my grandfather introduced me to – and I have been a collector of specie since that day. Yes, all these years later, I still go to auctions and still purchase collector AND investor grade coins – in gold, silver, nickel and copper. Some I purchase for the same reason you seem to be considering – investment – not so much for myself any longer – but for my granddaughters. It never dawned on me until I was 42, that one could actually make a comfortable living providing both investment grade coins and security to desiring clients and collectors – and 16 years later I am still doing it.

Many of the folks, who you will talk to in this “industry” have been doing it for three years or less – and they are still “selling” you what their bosses want you to buy – a bill of goods. They are all hopping on the bull-market-in-gold train and that is all they know. Enough on that topic.

Consider the following: When building a home, where do you begin? Do you get a bunch of friends to come over on a Saturday afternoon to “raise the barn?” Do you start by putting up the walls first, then the trusses and roof sheathing, etc.? “Oops, baby. We have to have everyone back next Saturday to pour the foundation!” Consider the purchase of gold and silver much like building that new home – you begin with the foundation – 90% junk silver, 1 oz. silver rounds, small, fractional gold coins – all of which could be used for barter and trade. Once you have that “first bag” put together – then – and ONLY then, do you want to consider filling your “second bag” with quality, investment grade coins (IGC’s).

The Rules of Thumb: There is an old adage, which says, “You buy silver to sell and gold to hold.” In simple terms, it means that you sell silver when it has made you a killing of a profit (which it will soon do) or when you need to put a bag of groceries on the table (gallon of milk, loaf of bread and a package of hot-dogs). Like your checking account – it is to be used for your “daily loaf of bread.” But gold? You buy it to hold onto – much for the reasons of which you have approached me – until you just can’t raise enough cash to replace the roof or pay the taxes. Gold should be used like a savings account – a security blanket. Can you eat it? No – but for thousands of years throughout the world – gold (and by extension, silver) can in many cases be used for “barter” or converted into the local currency of choice.

Allow me to address the “financial crisis” portion of your note: It’s quite simple, contrary to what you may have been told (and I can fairly well guess by whom) during a financial crisis or collapse of the U.S. Dollar – NO ONE IS GOING TO CARE THAT YOU OWN AN MS-ANYTHING! When our system gets to the point of financial Armageddon – and ALL fiat systems do – all anyone will care about is the weight of the gold – or silver. Rarity and grade will become valueless!!! The only people who will want it will be the robber-barons, who are left – and they’ll want to steal it at cents-on-the-dollar.

A Modern Horror Story: Recently, I had a gentleman contact me from Texas, who in the year 2000 came to a personal decision that he wanted to diversify his investments into gold. He set out to find a dealer who would provide the basic, simple “ounces of gold” that he felt would fit his needs. Because of an ad he had heard on the radio, he contacted a “Rare” Coin firm in New Jersey, who smoothly convinced this gentleman to purchase a selection of certified (slabbed) “rare” coins, promising him untold multiples of profit in the few short years to come. The profits never came – even though he had been told that “when gold doubles in value, these rare coins traditionally have tripled or quadrupled in value.” Since 2000 gold has MORE than doubled in value – and yet the value of his “rarites” had declined by over 52% – in part because he had purchased common-date, generic coins at industry standard overinflated prices (estimated 40% markup). His $19,000 investment brought no more than $9,052.00 in October of 2005 – and yet – if he had only placed his original investment into common bullion coins (American Eagles or Canadian maple Leafs) or even pre-1933 British Sovereigns (genuine “coin of the realm”) – his holdings today would be valued at approximately $38,000 (approximately $51,000 as of 10/07).

In late November of 2005, my new client has started over and is on his way to recovering the losses of an ill-advised “investment” – and the barter or exchanging of a quarter ounce of gold will be much easier than swapping an MS-65 common-date Double Eagle for a Double Cheesburger at Mickey D’s.

Fini: I believe that the first thing that I can help you do (after your homework) will be to assist you in determining exactly what it is that you and your wife are attempting to accomplish. It will be from that point, that we can determine the wisest path for your “portfolio” – and I DO hate that word.

As to your final question, at our firm, the acceptable forms of payment are personal check or bank-wire transfer. The credit card companies are making too much of your information available to those who don’t need to know – and besides – they charge us 3% on the gross sale. In order to keep our prices down, we can ill afford to absorb this expense.

As I intimated at the outset, this would be a lengthy response and yet I hope that it has been helpful. I am by no means attempting to sway you away from your initial direction, but by education, attempting to help you redirect your thoughts on the issue. I would happy to assist you in these endeavors and be proud to serve you and your family for years to come.

~ The Ide(a)s of ‘Rare Coin’ Dealers – Pt. II ~
Following is a continuation of an e-mail dialog, which I have been conducting with a potential client from the east coast. J.B.

Whew, what a great and educational response to our questions. Please refer below to my response and/or questions to your comments. We appreciate the time and consideration that you’re providing us.

I appreciate The Two Rules of Thumb. Yes, we want to invest in gold and silver primarily to prepare for a potential collapse of the US dollar. Other websites have indicated that one should avoid buying gold and silver bullion because the government could do again what it did during the Roosevelt years and confiscate it, but the Gov’t can’t legally confiscate coins. We take this with a grain of salt, so can you shed light on this issue. You say that in a crisis the weight of gold and silver is what anyone will care about; thus, bullion would work as well as coins, right? Also, my brother-in-law says that buying w/gold and silver during a financial crisis would likely invite aggravate theft. There’s truth to this logic, so would it be wise to retain gold and silver in a bank safe deposit box or in the home under lock and key? Also, we’ve read that banks can legally deny its customers access to their safe deposit boxes during a financial crisis. Yes? No?

As you know, I’m an IRS employee and have participated for years in our Thrift Savings Program. Though my funds are providing excellent returns, I’m reading and sensing that it’d be wise for me to take a loan on a portion of these funds to apply towards the purchase of gold and silver. Some folks think I’m fool hardy (because the price of gold is so high right now), but we think it’s a wise move because it’s an investment that’ll provide an added and lifelong sense of security for us, our children and grandchildren. I’m awaiting word on my loan application that will provide $10,000-$15,000+ for these investments.

On the face and delivery of your response, you seem like a damn nice guy and a straight shooter, and this observation comes from a guy who served in various capacities as an Army recruiter for 10+ years.

Your response to these questions will be appreciated.

Thanks again,

(Names omitted for privacy)

Mistakes do happen and given the time of year it is for you – I’ll allow it. The name is Jeff – not Bill. Just funnin’ ya’ so don’t be concerned.

I also am happy that you took the time to read before we got together – it clears up a lot of detail early on – and I hope has answered as many questions as it raised – and it sounds like it has.

On to your next set of questions: As a rule, I make “bullion coins” available to clients who are absolutely insistent, however I do not personally own any for the reasons everyone in “the industry” acknowledges – a fear of the ghost of Roosevelt. In 1975, when our “privilege” was restored, allowing us the ability to “own gold” once more – it was just that – a “privilege” granted by Big Brother. It is commonly believed by most that, at the time of FDR’s dastardly deed – that we were the only ones being raped – in fact we were the last. The die had been cast amongst the “free nations” of the world – and the global depression was upon us all.

From the Kettle Moraine Precious Metals Silver Catalog:

The provisions of the Gold Reserve Act of 1934 and the Executive Orders and banking laws of 1933, which originally demonetized and confiscated all outstanding gold coin in the United States, prohibited the individual possession of gold bullion (or any other recognizable use of gold as a store of value). However, they … permitted the retention of gold coins of “recognizable numismatic value.” Failure of the original legislation to define adequately what constituted recognizable numismatic value caused considerable confusion for some years, but in general, the parts of the gold regulations concerning numismatics were not rigidly enforced – at least not to the point of harassing collectors of gold coins.

In 1954, the Treasury Department recognized at last that the time had come to legitimize the numismatic gold market. Consequently, an amendment was made to the Gold regulations, to the effect that all gold coins minted prior to 1933 would subsequently be presumed to be rare and of recognized special value to collectors, without the necessity of further specific determinations by the Treasury. All U.S. gold coins and the vast majority of foreign gold coins were thus freed from the overhanging threat of confiscation…

Anyone who says that “THEY can’t take it” is a fool. Just consider the economics of the land today and the indebtedness of our nation to the world – the Piper must be paid at some point –and gold has proven to be the answer throughout history.

Question: “Would it be wise to retain gold and silver in a bank safe deposit box or in the home under lock and key? Also, we’ve read that banks can legally deny its customers access to their safe deposit boxes during a financial crisis. Yes? No?”

Your brother-in-law is not totally incorrect, however if I am to own specie, I want as few people to know about it as possible and I most certainly would not put it into the hands of the International Banksters. Get your own safe. As relates to the bank’s ability to block you from your goods during a financial crisis, the answer that question of course is, “yes!” If you do nothing else, don’t wait until next Christmas –watch the movie, It’s a Wonderful Life as you consider your own question. Fear was put into the minds of the depositors of the Bailey Building and Loan – and it created a run on the institution. It’s just a small example of what Roosevelt did during his first week in office – and a sign of what was to follow.

This happened in about 1992 to a bank in Texas – on a Friday afternoon, when the F.D.I.C. took possession and prevented depositors from gaining access to their accounts until later the following week – and that included their deposit boxes full of their “goods.”

Stating what I have about bullion and overpriced (by most dealers) numismatics; please allow me to suggest several alternatives for your consideration. Given the statements made within the above section from my catalog, there are alternatives – small, fractional gold coins from around the world, which are considered to have “historical” value – and would include carefully selected, affordable American issues.

Once again, I am not against putting funds into certified, high-grade coins, however with the funds you have suggested that you are going to work with at this time, prudence would be wise. If you had ten times that amount to begin with, my recommendations would be the same – except that I might suggest 20 to 25% of those kinds of funds going into selected true rarities. I may cover this more toward the end of this lengthy response.

I think that there are numerous variables, which I am not privy to at this point, which can make a difference in one’s decision. Your age; how close to retirement; the ages of your children; short-term goals; long-term goals (financially and otherwise) and your own honest opinion of where you believe that the economy of this nation is headed. In your case – it must be difficult to separate “church and state,” so to speak. I do not envy you in that respect.

As to gold being high priced right now – as compared to what? Five years ago? Of course. The reality is that while gold has more than doubled in the past five years, the dollar (at this time, still the international currency of choice) has lost half of it’s REAL purchasing power. Your wife can see that when she goes to market. You can both see it at the gas pump. Neither of these two items are included in the REAL inflation figures being dispensed out of Washington as they were 25 years ago, when inflation was acknowledged at twenty to 22% – at the time gold went to $850.00 per ounce. The truth is that the Great Wal-Mart of China is both a blessing and a curse to this nation; providing products at lower cost than anyone else on the planet – all while we finance our own demise by selling our country to China. If they cash in their American chips – we might as well cash in ours – but not in the same fashion.

For over six millennia, gold and silver have provided a stable foundation for any family, merchant or nation, who have had the wisdom to hold onto it. Why do governments teach us to believe that gold is an archaic relic – but they clearly hold over 70% of the world’s known supply. They still trade with it amongst themselves and yet they tell us to “do as we say, not as we do?”

My personal goals are for my grandchildren as I continue – no matter the cost – to add to their own holdings. As with your own children – what are their chances in the future if we do not lay down a solid foundation for them today?

Economist’s from around the world – those who have nothing to gain by the sale of gold or silver – believe that we have only just now entered the second leg of this long term upward trend. Some estimate that gold may reach as high as $2,000. to $3,000. an ounce. I pray not or it’ truly is all over. I tend to be more conservative at a $1,000. to $1,500. Yet, if all gold should do is reach it’s previous peak ($850.00), silver could easily go from it’s present value of (about) $9.00 per ounce to $50.00 per ounce or more. I’ll let you do the math.

Does that mean that you should do a complete turnaround and put it all into silver? I don’t recommend it. Silver is much heavier and too bulky to transport “quietly.”

Based on general assumptions and not having answers to the rhetorical questions I posed to you above, my recommendations to you might include the following:

1. Approximately 15 to 20% of your designated funds into silver. As to what type? Either “junk silver” or pure 1 oz. silver rounds or American Silver Eagles.

2. Approximately 60 to 80% of your funds into a diversified selection of gold coins, offering your family security against the continual foolishness and mismanagement by pollyanna-ticians, growth potential, minimal down-side risk and the beginning of what could prove to be a life-long love of “coin collecting.” We’ll talk about that more in detail when we speak.

3. There are some exceedingly spectacular arenas in high-grade numismatics, which no one has probably shared with you. We can talk about them and you might find them of interest due to the fact that you can acquire higher grade than in gold – for far less money – and historically they have outperformed – whether gold or silver have moved or not, therefore you MIGHT consider earmarking up to 20% of your funding into that arena.

Allow me to tell you about my (then) 5 1/2 year old granddaughter: – she has grown up in my offices and studio and knows what REAL money is. When she comes over, she asks, “do you have any gold monies Daddo?”

Once again, I hope that my commentary has enlightened your thoughts on this subject and I hope that I have answered your questions.

I look forward to speaking with you at your convenience.

(signed)

Final Notes: Since the original publication of this column in January of 2006, “spot” gold had gone from $535.00 per ounce to over (as of October 22, 2007) $750.00 per ounce – a 40% increase (ultimately reaching nearly $1,900.00 per ounce just a few short years later. ~ JB, 9/20/17) – while, some better-date certified $20 U.S. gold coins have lost more than 50% of what unwitting customers PAID for them. From the wholesale level (the price dealers must pay the importer/suppliers) common-dates have stayed about even. In the scheme of things (and it is a scheme); in 27 years, I have only known of three “investors”, who actually made money after having purchased common-date, historic, pre-1933 US gold coins. If you are truly concerned with “Protecting Your Wealth” – then you would be advised to stay away from the Zurich-Americans and the coin companies named after private jets and muffler repair establishments or you might drowned in one of those 10,000 lakes. Consider the following….

Another Modern Horror Story:
On Saturday, October 20, 2007, I received an email from a gentleman, who had been “sold” a group of eleven, MS-63 PCGS/NGC certified US $20 Liberty Double Eagles. The first coin was sold to him in September of 2003 and the final coin in July of 2006. Part of the “sales hook” was, that each of the eleven coins were San Francisco Mint issued, minted from 1892 through 1902. Frankly, these are nice coins to have and to hold – but PART of a complete collection – which might include a complete run of the San Francisco issued coins in the series, beginning with 1877 and continuing through 1907 – and this would be for the ‘Type 3’ series alone.

Purchase Price?: $40,000 – INFLATED RETAIL. If purchased through Kettle Moraine Precious Metals (Kettle Moraine, Ltd.), the total cost would have ranged between $29,350 and $31,680 at that time.

Actual Cash Value (wholesale) 10/24/07: $16,549.00 – a loss to the client of nearly 60% of what he had originally paid. The customer would have lost far less money dealing with Kettle Moraine Precious Metals – but the point is – he still would have lost – due to market conditions – NOT because he had been ripped off to begin with. Since the time of the first coin purchase on September 5, 2003, until October 24, 2007 – gold had more than DOUBLED! What happened? Spot gold on the original day of purchase was $376.00 per ounce. On October 31, 2007 it was nearly $796.00.

We’re not talking about true, rare-date coins here – that is a completely different kind of market – much as collectible, rare works of art by the masters. In addition – we’re not talking about what the coins were “sold for” in January of 2006 – but what their REAL VALUE was at that time – not the inflated market created by a suspect band of pirates.

By the way – if this client had put his original $40,000 into the old, mundane British Sovereign – he could sell out his position TODAY and realize a net PROFIT in excess of $34,000 (October 31, 2007).

UPDATE – November 1, 2007: In a discussion with my importer in late October 2007, my representative admitted to me that I am correct; Even though the “value” of gold had more than tripled in the previous six years – in fact the REAL wholesale value of common-date, certified “(non) rarities” had in fact remained flat and in many cases actually declined – and this guy is paid to sell me this stuff.

UPDATE – April 30, 2013: Upon further consideration of the previous referenced client, his holdings of British Sovereigns  today, would have a conservative value in excess of $132,554. THAT is true wealth preservation. The client’s original purchase of 11 MS-63 ‘S’ minted gold pieces, are currently worth about half of what he paid for them – all due to the greed of a “rare coin ‘Pitchman’.” ‘Spot’ is nearly double once again, from what it was in October 2007, but his original investment has gone lower. BEWARE!

In the early 1990’s I represented a well-known National “Rare Coin” firm in the southwest part of the country. The actual motto of the sales manager (whom we referred to as “Straw Boss”) was, “This shit isn’t for buying – it’s for selling!” So much for the ‘Christian’ attitude of preserving the client’s wealth. Stick with the volume purchase of private gold and you’ll actually come out much further ahead – both in wealth preservation and probable financial gain.

Fini: In closing, all I can advise you is to BEWARE of the Ide(a)s of the Rare Coin Pitchman, as the buyer of these over-priced “rarities” rarely comes out ahead. Your “broker” is called “broker” for a reason – once you have purchased the over-priced coins – YOU are the one who is broker!

BUY GOLD AND SILVER – BUT BUY THEM WISELY!

Without Apology I am,

Jeffrey Bennett, President
Kettle Moraine, Ltd.
623 – 327 – 1778