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Date: December 22, 2009
Subject: The Money of Gentlemen


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G&G Associates Tax & Financial Consulting
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The Money of Gentlemen

Imhotep (Wisdom To You),

Silver gets a bum rap, but unlike gold it has no history of confiscation. No country lists it as a reserve — which means the government can’t manipulate the price by buying or selling. And physical silver is estimated to have a market cap of about $2 billion. That makes silver about the size of one mid-cap stock. (By comparison, the market cap of Wal-Mart is about $210 billion.)

Everyone tends to write-off silver as more of an “industrial” metal than a “monetary” metal, even though it’s really both. Silver is used in a wide variety of applications from photography to wiring... and everything in between.

And it’s this industrial use that causes silver to get used up and destroyed… Whereas its sister metal, gold, seems nearly indestructible. It’s estimated that over 90% of the gold ever mined in human history exists today. The same is definitely not true of silver.

Indeed, aboveground silver is much rarer than aboveground gold, even though gold costs about 55 times more than the price of silver. Seems like a major price disconnect to me.
Especially considering this anti-printing press currency isn’t stable like gold and it’s actually rarer!

When gold prices rise, silver’s price will rise higher on a percentage basis. Best of all, silver’s lower price allows new investors to inexpensively and quickly build a large position. And within that niche, there’s also a collectible side to the silver market.

The Money of Collectors

Silver, gold… or even platinum or palladium… minted coins can develop numismatic value.
Generally, the rarer the coin and the better its condition, the higher it will be. My favorite example is the 1913 liberty head nickel. It doesn’t even contain gold or silver. just copper and nickel. But only five of these coins were ever created. So the last time one of these coins traded hands, it cost a collector $3 million.

Now that’s portable wealth!

Recently, I watched a show which that met with Van Simmons of David Hall Rare Coins, in the state of California. It’s also home to the Professional Coin Grading Service (PCGS), the first coin grading service in the world.

Inside their vault — essentially inside a bigger vault — were millions of dollars in coins being graded for individual investors and coin dealers alike. I was able to get a rare look into the arduous process, which involves multiple inspections by the top coin graders on Earth. When two graders can’t agree on a coin’s value, a third is brought in. And even that grade won’t be final until it’s verified by the master grader.

Rare coins have, like gold and silver bullion itself, still not recovered from their 1980 peak. Does that make them undervalued? In a world of printing press currencies?

Absolutely!!!

More importantly, at the last market peak, the concept of coin grading didn’t exist —PCGS started grading in 1987. This means that there’s a lot more knowledge out there accessible to the average investor looking to diversify away from printing press currencies. Coin guides can tell you the approximate value of a graded coin, and you can make your investment decision from there.

But it’s not at all like day trading stocks or flipping currencies for a few pips. This type of investment is multi-year, possibly multi-generational. It’s one of the more interesting ways to diversify away from printing press currencies and preserving value for future generations. Any investor at least mildly skeptical about the power of printing press currencies should look into silver, gold, and numismatic coins.

Until next time...BUY GOLD AND SILVER folks. You have to be tired of reading me type this week after week.

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Hotep (Peace),

Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.

 

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