Perspective By Rich Checkan
Information Line - August 2023
It’s good to be back home.
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Editor's Note: Alexander Green is Chief Investment Strategist of The Oxford Club. On August 16th, he'll be joining us for the next On the Move webinar... register today! This article was originally published in Liberty Through Wealth on June 26, 2023.
Why am I surprised?
Because by almost every objective measure, there has never been a better time in history to be alive.
The human life span has nearly doubled in the last hundred years.
Formal discrimination against women and minorities has ended.
Standards of living have never been higher. (U.S. poverty recently hit a record low. Median household income and net worth are near record highs.)
Senior citizens are cared for financially and medically, ending the fear of impoverished old age.
Educational attainment has never been greater.
Technology and medicine are saving, extending and revolutionizing our lives.
Travel - to the next town or the other side of the world - has never been easier or more affordable.
Despite a recent spike in violence, crime is in a long-term cycle of decline.
And - while we have rarely been more polarized politically - the country is at peace.
In the West today, we have tremendous economic and political freedoms.
We work shorter hours, have more purchasing power, enjoy goods and services in almost limitless supply, and have more leisure time than ever before.
I'm not trying to idealize our lives or argue that we live in a perfect world. Far from it.
But the trend is clear: Human well-being is in a decidedly upward arc.
Yet - for decades now - Americans have routinely told pollsters that the country is going downhill, their parents had it better and their children face a declining future.
When I cite facts to the contrary, readers often ask, "If things are so good, why do we feel so bad?"
I believe there are seven primary reasons:
Looking at this list, you might be tempted to upgrade your perspective, pay less attention to the media, step off the hedonic treadmill, appreciate what you have, quit comparing yourself to the Joneses, log off your laptop, and spend more time in the here and now.
And I wouldn't disagree.
Our country has always faced serious problems and we always will.
Moreover, many readers are struggling with personal issues - work problems, family problems, health problems or financial problems - just like all people in all places and times.
But we're grappling with these problems during the most favorable milieu in human history to be alive.
It makes sense to stop and appreciate that.
This is particularly true for investors. After all, if Western civilization really is in imminent peril, why would you risk your hard-earned money in the stock market?
Fortunately, life isn't just one damn thing after another. It's getting better for most people in most places in most ways.
Which is not the same thing as everything getting better for everybody in every way.
That would be a miracle... not progress.
People in the West today are living longer, healthier, safer, richer, freer lives than any people in the history of the world.
That's something to celebrate.
That incredible decline is great news for all Americans. It means the painful price increases on our consumer goods are slowing down... And for investors, it's also quite the gift, as stocks have been rallying on the news.
This chart shows that the money supply is much tighter today than the 5.25% fed-funds rate would indicate. And given the massive decline in inflation, it's one more reason to believe that rate hikes are darn close to ending, if not already done for good.
A recent Washington Post article shone a light on unscrupulous practices within the precious metals industry.
“Unlike most bullion coins, however, [these] coins are typically exclusive to the companies who sell them, usually with markups far higher than those charged by mainstream coin retailers,” the article revealed about how these scammers take advantage of unsuspecting clients who assume that because these companies are able to advertise on major news networks that they can be trusted.
This is unfortunately not the case.
In case you’ve ever considered buying from these bad actors, remember that the margin on precious metal bullion is normally extremely tight, so for these companies to have the massive advertising budgets required to be able to advertise on television, there is no way they are charging close to what reputable dealers do.
Even worse, many of these untrustworthy dealers tout coins as “modern numismatics”, developing limited edition designs, promising that they will hold future collectible value.
But, limited edition does not equal rare. And rareness in availability does not mean they will ever have collectible value.
There is a difference between bullion, numismatic coins, and other dubious gold products on the market, and it’s important to know the difference.
Rare U.S. coins are a commodity like few others, and there is a limited supply available. Rare coin prices are determined by what is sold around the world and rises as investors and collectors pay more for these increasingly rare items.
As a long-term investment, rare U.S. gold coins are a good next step after achieving the benefits of portability, privacy, market performance and currency protection with precious metals in bullion form. Rare coins are an asset class not correlated to other mainstream, traditional assets and therefore largely unaffected by volatility and downturns in other markets.
With certified coins, it is important to understand what is meant by a coin’s grade. Based on condition, coins can be graded from Poor, at the lowest end of the spectrum, all the way up to rare and pristine Gem Uncirculated. In addition, many appraisers use the internationally accepted Sheldon grading scale of 1 to 70, which was first used in the United States in the late 1940’s. The higher the number, the better the grade of the coin, and the more it will be worth at auction or on the open market.
Pre-1933 U.S gold coins occupy a desirability and rarity beyond their melt value because of unique circumstance. President Franklin Delano Roosevelt issued Executive Order 6102 in 1933, and as a result, millions of previously circulated gold coinage was confiscated and melted down. The coins that have been recovered from the previous era are ones that remained hidden or were stored out of jurisdiction in vaults overseas. The coins left from this time are truly the last of their kind, mere percentages of the original mintages remain, and even fewer in quality condition because of the wear and tear.
Unless a similar act were to occur in the future (and this is so extremely unlikely to happen due to the U.S. dollar no longer being on the gold standard… there would be absolutely no reason for it), there is no reason to believe that the scarcity of these modern issue collectible coins will ever result in desirability.
The truth is that the high mark-ups on modern issue collectible coins are based on a false perception, and they have no more collectible value than any other souvenir or trinket, their only worth is in their melt value.
Even the special proof edition coins released by reputable mints are not a guarantee of collectible value. Every year the U.S. Mint releases slabbed Certified Proof American Eagle coins, but the reality is they have no additional value than their standard issue bullion counterparts. 1 oz. of gold will always be worth 1 oz. of gold, unless extraordinary circumstances occur… that combination that resulted in the vibrant U.S. pre-1933 gold market of true rarity and desirability simply cannot be manufactured.
A collectible coin or bullion coin’s price should easily be comparable with research. Before you buy anything, compare premiums with the same coin at multiple dealers. If it’s out of range, the price cannot be justified. If there’s no secondary market for that item, it does not justify the premium.
Moreover, look for transparency with the dealers you buy from so you can determine if they are worthy of your trust.
But don’t let your concerns keep you from adding a sound allocation of precious metals to your portfolio. We expect precious metals prices to continue to increase over potentially the next 5-7 years.