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Posts from the ‘Coins’ Category

America the Beautiful 5 Ounce Silver Coins are Gorgeous

The United States Mint has released images of the new 5-ounce America the Beautiful Silver Bullion Coins and they are gorgeous.

Source: Coin News

The designs are legislated to be nearly identical to the new quarters, except that they are a full three inches in diameter, making them large (and thin).

These are the first five ounce bullion coins produced by the US Mint, and are not going to be sold directly from the US Mint website.  This, of course, means that collectors are going to have to pay an unnecessary markup from dealers to get them.

Silver is now trading at over $21 / ounce, so expect each coin to be at least $110.

They are making one for each of the new quarters – five in all.  They are minting 500,000 total – 100,000 each.

I expect these to sell out quickly due to their unique design, size, and limited mintage.  $110 might seem expensive for a coin, but compared to escalating gold prices, silver arbitrarily seems “affordable”.

2009 Platinum Eagles Sell Out: Speculation or Investment?

This past week, the US Mint sold out of the one ounce 2009 Proof Platinum Eagle.  As no bullion coins or fractional sizes were minted this year, it was the only US Platinum coin produced in 2009.

From CoinNews.net:

Released at Noon Eastern on Thursday, December 3, 2009, the Platinum Eagles were limited to a mintage of only 8,000. Over 7,200 of those sold in the first few days, even with a household order limit of 5 pieces in place. The US Mint sold just 4,769 of the one ounce proof coins during all of last year.

Some had theorized that this year’s run would be challenged by the high price of the coin ($1792.00) and the relatively unpopular new design.  However, given the huge demand for precious metals this year for investment (gold, silver, platinum, palladium), it’s hard to be completely surprised that this coin sold out so quickly.

Nope.  2008 the US Mint only sold 4,769 coins.  This year, they sell out early at 8000 coins.

The case for buying platinum right now is fairly strong:

  • The relative price of platinum to gold is extremely low, given gold’s huge run up.  A few years ago, platinum cost over 3x an equivalent amount of gold.  At current prices, the two metals are approaching parity.
  • Simple investment vehicles in Platinum and Palladium, like ETFs, do exist (they trade in London), but don’t have popular US versions (yet), so investment demand remains weak compared to it’s ETF-rich brethren of gold (GLD) and silver (SLV).
  • The automotive industry, which is the largest consumer of platinum and palladium, is extremely depressed.  However, since the demand for fuel efficient cars is growing, the use of these metals in catalytic converters and fuel cells seems to forecast significant future demand when the industry recovers.

That being said, I was surprised when I searched eBay for completed listings for the 2009 Platinum Eagle.  Normally, when there is a sell out at the US Mint, you immediately see panic buying on eBay for huge premiums over the US Mint price.

Here is the query.  What you see is that, as of December 12, the prices range from $1727 to $2050, hardly a premium given the transaction costs of eBay / PayPal which can easily run 8-9%.

As a result, I have to wonder:

  • Was the sell out the product of true individual demand for the coin?  Or was this a case of coin dealers speculating on a sell out and premium collectible opportunity?

The problem with the Platinum Eagle series is that it’s unclear how many collectors actually try to build “the complete set” of these expensive coins.  Set building is typically the primary driver for premium values for the silver and gold eagle series.

I’ll be watching the completed auctions closely this coming week.  There are a couple sellers already experimenting with higher prices.  Let’s see if they stick.

The Best Hedge for Crisis: Gold, Dollar or Both?

I’ve been encouraged by a few friends to spend a bit more time writing blog posts about finance and economics in the real world, as opposed to Farmville.  (Hopefully the Zynga fans will allow me brief distraction with the real world.)

An article last week in the Wall Street Journal on investing in gold reminded me of a topic I had meant to cover this past summer:

What is the best hedge for a crisis?

The last two years have validated the fundamental premise of The Black Swan theory.  That premise is that, due to incomplete information and faulty statistical assumptions, the market generally underprices risk at the “tails” of the distribution.

In other words, while the outcomes of the market tend to look like a normal distribution, in reality, more “rare” events happen than would be predicted mathematically.

Given a potential fear of crisis, what is the best way to hedge?  What’s the best way to have some fundamental security in the face of these events?

For Nassim Taleb, the author, he has made his investment approach well known.  He keeps the vast majority of his money in cash, and periodically invests a small percentage in out-of-the-money puts on the market. In 2008, this made for extremely high returns (between 65% and 115%).

Unfortunately, this is such an extreme approach, it’s hard to recommend it as a general practice for anyone but the most stalwart intellectual and contrarian.

If you read any financial press, or listen to AM radio, you likely have heard a much more common refrain about a hedge against crists:  Gold.

Gold has historically been pitched as the ultimate hedge against inflation and crisis.  You can literally find websites that explain how to not only buy gold bullion, but how to effectively bury it in your yard in such a way that it won’t come up on satellite photos (in case the US Government chooses to confiscate it again, like FDR did in 1933.)  I’m not kidding.

Because fascination with gold goes back basically as long as recorded history, it’s rare to find new information on the topic.

This article in Seeking Alpha, however, caught my eye, as a rare piece that had something new to say about investing in Gold.

July 9: A Golden Hedge Against The Dreaded Dollar

This article highlights a well known point – that recently, when the market collapsed, gold actually collapsed with it.  In fact, if you look at the charts, in the past decade, gold and the market look like their moving together.  This makes it a terrible hedge, because good hedges are supposed to be decoupled.

In truth, GLD does appear to be a venerable contender for a portion of a well-diversified portfolio. Yet in a “black swan/perfect storm catastrophe” like the 3 month, systemic breakdown of 2008 (September through November), GLD dropped an astonishing -30%.  PowerShares DB U.S. Dollar Bullish (UUP) soared 20%.

What’s interesting, however, is that in these periods, a very surprising asset has done well: The US Dollar.  The author goes on to advocate for a split between the US Dollar Bullish ETF and Gold.

The article shows this chart, which tracks gold and the US dollar over the past two years:

The insight here is not that you should split your “crisis” holdings between Gold and the Dollar.  Most Americans are already heavily weighted in dollar holdings.   The insight is simply that gold actually doesn’t cover you in all crises, despite the protestations of the gold bugs.

Indeed, I would like to see this relationship going back over the past century, to see what possible approaches might make sense:

  • A balanced approach?
  • A reciprocal trade where you sell into strength of one, and buy the other?
  • Relationships between various mixes of gold & dollar to hedge a stock portfolio?

My guess is that a dollar-denominated fixed income allocation (Treasuries) would look similar to dollar bullish, and would fit a more traditional view of asset allocation.

Ultra-High Relief (UHR) Palladium Coin from US Mint?

This is actually old news, but I picked it up in a few searches I was doing on Palladium.

It seems that in early April, Max Baucus (Sentator from Montana) put forward a bill (S. 758) to authorize the US Mint to produce a 1 ounce Palladium coin, similar to the very successful 2009 Ultra High Relief gold coin.

CoinNews.net: Palladium Ultra High Relief Coins Come Back, S. 758

History, however, provides insights. Senators Max Baucus [D-MT] and Jon Tester [D-MT] sponsored S. 758 and they also introduced S. 2924 for the same purpose last year. That bill was similar to an earlier and unanimously passed House version, H.R. 5614. The Senate failed to take action on either before the new year, and both died with the end of the 110th congress.

The previous bills would have authorized one-ounce proof and uncirculated palladium coins that were digital reproductions of the famed Augustus Saint-Gaudens’ designed 1907 $20 Double Eagle — often described as the most beautiful coin ever minted in the U.S.

Buyers of the gold 2009 Ultra High Relief $20 Double Eagles can attest to the beauty and detail of that 1907 design. During the first day of Ultra High Relief sales alone, the US Mint sold 28,173. Despite the over $1200 price tag for one, the latest Mint sales figures show 56,527 have been purchased.

You might be wondering why Max Baucus, who is point on driving health care reform in the Senate, would concern himself with coinage.

It turns out that the only mine in the United States that produces Palladium is in Montana, and with the auto industry hurting, it’s a serious jobs issue for the State.

Commodity speculators may be on the outs with regulators in Washington right now, but it seems if you take a commodity and turn it into a coin to spark collector/speculator interest, well, that’s just OK.

In any case, I would love to see this happen.  Buying Palladium right now is incredibly difficult.  2005 & 2006 Canadian Maple Leafs are hard to find without a huge (30%+) markup over the metal.  Ironically, this crash of the auto marketplace is a perfect opportunity to invest in Palladium.  Not surprisingly, however, the lack of demand for the metal also seems to translate into a lack of vehicles to invest in it.

Such is the life of a contrarian coin investor.

Let’s hope Max can take a day off from the health care push and get this one passed.  Given it’s bi-partisan support, maybe it can help revive some form of bi-partisan cooperation in Washington… :)

Best Coin Video Ever: Rick Mercer at Canadian Royal Mint

Found this courtesy of CoinNews.net:

Rick Mercer, Canadian satirist and TV personality, throws his brand of humor into the mix as he tours the Royal Canadian Mint in Ottawa.

Watch Rick as he walks through the Mint’s gold vault, checks out the gold refinery process, the Mint’s rolling room and finishes the tour by handling several gold coin blanks and striking some special coins.

Best coin video… ever.  :)

If Only I Could Use eBay to Short Sell Coins…

Caught this article yesterday on the new 2009 Lincoln pennies:

2009 Lincoln Penny Mania

A quick review of recently completed eBay auctions shows unmarked rolls selling for $30 to $50 each. Single pennies have sold for $2 to $4 each. Rolls with a Lincoln postage stamp and cancellation from the first day of issue at Hogdenville, Kentucky have sold for over $200. Most astoundingly, a single 2009-P Lincoln Cent graded NGC MS66RD and attributed “First Day of Issue” has sold for $400.

View the current eBay auctions.

It’s truly bizzare.  $0.50 rolls of the new Lincoln pennies are going for $30-$50 on eBay.  That’s insane.  We’re talking about a coin that will be minted in the hundreds of millions, if not billions, this year.

What I would love to do is to “short” these rolls – effectively presell them at this price, collect money now, and then send the rolls in a few months when you’ll be able to source them at less than $1/roll.

Unfortunately, that violates eBay policy. It’s for good reason, since short selling actual inventory is hard to distinguish from a scam transaction.  After all, how do you know the seller will make good on the future delivery?  What is the recourse for the buyer?

The lack of short selling, however, means that temporary supply/demand imbalances like this lead to effective price gouging for buyers who assume the eBay price is “fair”.  It’s certainly fair for the moment, but the expected ROI on this purchase for the collector is likely to be disasterous.

Still, I wouldn’t mind the ability to short sell a few hundred rolls.  If you have access to a bank that actually has these rolls, you’d be a fool not to put them up on eBay quickly, before the prices settle down.  Do I have any readers in Kentucky?  If so, can you pick me up a box?

2009 Ultra High Relief Double Eagle Gold Coin Available on Thursday, 1/22

The US Mint has announced that the 2009 Ultra High Relief Double Eagle Gold Coin will go on sale at 12:00pm EST on Thursday, 1/22.


It’s unclear what demand for this coin will look like, given its price.  (Likely $1200).  This announcement reflects the new US Mint pricing strategy for precious metals – basically a premium over market price, in buckets.  Still, gold coins continue to exhibit considerable demand, and this is an extremely flattering classicly-designed piece.

You can read more about the coin here on my blog, or here on the US Mint website.

Update (1/20/2009): Found this product page today on US Mint website.  Price is $1189.00, and delivery might take 6-9 months!  Limit one per household.   Talk about delayed gratification.

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