All that Glitters…
by Richard
We may be closer to a market bottom than I had thought.
The proof is the hysteria over gold.
When the investing public is scared straight, they cash in all their chips and put their money where they know it will be safe.
When tech stocks crashed in 2000, bringing the whole market down as well, retail investors bailed out of the market and put their money in real estate…where it would be safe.
And when they were clobbered in the real estate bubble, they turned to Gold…where it would be safe.
Bombarding Fort Knox
The demand for American Eagle gold bullion coins has been so great that the treasury has run out of inventory, according to the Wall Street Journal’s “The Eagle has been Grounded” (8/21/08, page C1).
Bullion coins trade at the fair market value of their content, with a slight premium for the coinage. There is a floor, of sorts, in that the 1 oz coin has a face value of $50.
For Silver bulls, their 1 oz bullion coin has a nominal face value of just $1.
And now advertising has been ramped up to fuel the demand. The pitch is pretty simple…in troubled times, turn to the one investment that holds its value in good times and bad.
Except that gold is a lousy long-term investment, especially when compared to equities as measured on any longitudinal time period.
The Midas Touch
It’s virtue is a function of its tangibility. And the fact that no government on earth can tamper with its intrinsic value. I wouldn’t trade a handful of gold bullion coins for all the paper currency Zimbabwe can print off its presses.
For those intrigued with this asset class, you may want to explore numismatic, as opposed to bullion coinage. Once quantifiable scarcity is introduced into the equation, you come out with an entirely different market dynamic.
The numismatic market has its own pricing floor, which is the bullion content of the coins, but returns can be dramatically higher.
The numismatic market has been standardized and enhanced by the introduction of graded and encapsulated coins, with two major national firms vouching for the quality and circulated condition of the coins.
For the survivalists out there, who envision the collapse of our paper and electronic money economy…there is a currency that will provide far more utility should we be forced to revert to a bartering based subsistence.
And that would be firearms and ample ammunition.
May 27th, 2010 at 7:44 pm
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