GOLD COINS AND MEDALS AND FUTURE VALUE

 

Future Value should be the main consideration of any financial decision.  The future, of course, is unknowable.  So we look to the past as prologue in figuring future value.

Most people in determining a fair price for a gold coin or medal look up the prices at auctions in the recent past for similar items.  And then try to pay a little less.  A good deal.  Right?

This is the same strategy most people use for buying a house, or a common stock, or corporate bond for example.  The distinction is that these are most often mass market and units are fungible.

The problem in employing this strategy in the Rare Hard Asset Market is that, when an item is rare any given auction may provide faulty information.  For example, if 2 billionaires both want an item it could go for 20 times the price it would go for in an auction where no billionaires are bidding.  I've seen it happen.

Conversely, an item that is poorly represented in an auciton, or is rare for reasons many are unaware, might go for a pittance of its future value in a given auction.  But when auctioned differently at an auction house used to handling this type of material for an educated clientelle, the same item might go for 20 times the value.

And finally the market is moving so quickly you might look up the value of item auctioned six months ago and plan to bid around that much, and it goes for twice as much six months later.

So what's the answer?  

Future Value.

You must become an expert at  estimating future value

What are the variables for gold coins and medals?:

Rarity,  Beauty,  Historical Importance. Demand.  

THere are other variables, to be sure.  But a command of these is most helpful.

As for Rarity Beauty and Historical importance, nothing is a substitute for cold hard research.  And good Taste.

Obviously, Demand is easiest to determine - but it is the most volatile.  It may last a few years, or a few months or many years.  It may be driven by a narrow group of avid collectors of a wide group of interested collectors.  And it leads to momentum investing.  Never a great idea.

What you want to determine to figure out future value is Future Demand.   This is not obvious.  And to undertand this you must undertstand a key aspect of any transaction.

Here's the secret: A transaction can be viewed as BUYING AN ASSET  OR,  A transaction can by viewed as SELLING A CURRENCY.

You have to consider both views.  And to do so you must have an understanding of the present and future value of the CURRENCY - which in no small part determines the current and future value of the Asset.

What is currently going on in the world of global currency?  You'll have to research that one yourself.  And until you do it will be impossible to make really good decisions about buying Hard Assets - which necessarily move in inverse relation to the currency.  So if you know where the currency will trading be in 2 or 3 years, you also know where the hard asset will be trading.

COINS AND MEDALS AS HARD ASSETS: AN ANCIENT ASSET CLASS BECOMES NEW AGAIN

 

lion symbol of Kings 500BC

and 1300 ad

The Royal Portrait 300 BC

AND 1500

AND IN 1830 AD

The Roman Emperors collected coins and medallions of Emperors and Empires past.  The Doges of Venice and the Medicis in Florence collected coins of the Emperors of Rome and had medallions struck by contemporary artists to commemorate their own conquests.  The Kings of England collected coins of past Emperors and the medallions of the great families of the Italian Renaissance, and had contemporary artists strike medallions in Gold commemorating their own conquests.

Coin and especially medals were a vital part of the wealth of great families throughout history.

And then tne world came off the gold standard in 1971 and the subsequent world became obsessed with the financialization of paper/electronic gambling systems.  Stocks, bonds, options, futures, forex derivatives, swaps, crypto currencies, fintech instruments  etc etc  

All this was supported by the unchecked unlimited printing of quadrillions of theoretcial cheap dollars. To make money cheap to fuel financializations real rates were kept deeply negative. The trouble is, now, finally, we've reached a limit on the system that has seemed limitless to some.  The limit is inlation.  Rent, home ownership, food, energy, education, health care has all become too expensive for the average human being.  This makes people angry.  And the Fed/Government has only one remedy in the age of financialization: print more money.  But that is the cause of the inflation.  Oops.  So maybe they try to stop printing for a while and raise rates a tad as economies melt down and the next crisis provokes - lower rates and more printing.

That's where we are

So we've come back to Hard Assets.  The wealthy are moving into hard assets in droves.  It's been a boom market for close to a decade but it is picking up steam.

One area that is finally coming back into vogue after decades in the wilderness is the Hobby of Kings and Emperors: Coins and Medals.

This investment has three things going for it:

1) Precious metal - especially gold.  Gold has captured the imagination of the wealthy for over 5000 years now.  It is an easy sell because of its intrinsic value - as established over 5000 years.

2) History.  There's nothing like a track record of value liniked to objects of historical interest and import dating back nearly three thousand years to the first gold coins struck under Kroisos of Lydia back in 540BC. 

3) Artisitry.  Many coins and medals were engraved by the greatest artists of their periods.

But don't take my word for it.

Consider: Blackstone has bought Collector's Universe which inlcudes NGC which grades coins.  They didn't do it to get a piece of the grading business.  Other hedge fund billionairs like Steve Cohen and Ted Turner and Dan Sondheim have invested heavily in the coins and colectible certification business.  Again, not because they love the profits associated with certification.  They, lilke many others are diversifying into Hard Assets because they see what is happening in the world of financialization.

Hard Assets have just entered the infancy of the Hard Asset Boom.  As financialization becomes more and more problematc due to a world awash in inflation and debt - with trend growth below 1 percent -Hard Assets will eventually become the Asset of choice.  

It's happening even as I write. 

And coins and medals of high quality exist in such tiny numbers compared to say, cars, or watches, or most paintings (not Vermeer, but you know what I mean), or memorabilia etc etc.  

Rising demand,  Small asset population = Sustainable Growth.

DEGLOBALIZATION MEANS INFLATION

 

The world is rapidly De-Globalizing.  Russia is at war with western Europe.  Grain, Oil and Gas are now Weaponized.

The US has joined the war by weaponizing the US Dollar. 

China has joined the war by buying all the Russian grain, oil and gas it won't sell to Europe.  And China is now launching a campaign to substitue the Yuan for the weapnized dollar througout Africa, and the East (India, Malaysia, Indonesia, Russia and its sattelites)

Meanwhile the US is taking every opportunity to provoke China over Taiwan.

And Europe is still deeply suspicious of the US because of Trump's assinine Trade War, which launched the disruption of Globalization.  They don't know what will happen after the next US election cycle.  Neither does anyone else.

Every single one of these Global factors is Highly Inflationary on the SUPPLY SIDE.  So there's not  a whole lot the Fed or the adminsitration of any country can do about it.

 Food, Oil, Gas and a Competitive devaluation of currencies means INFLATION FOREVER.

And with Currencies, Grains, and Oil and Gas all weaponized  and every Global Block deeply suspicious of every other Global Block the prospects for a cooperation that would alleviate Inflation are NIL.

The only weapon in the arsenal for every nation is to raise rates and hope that by crushing demand inflation will abate a bit.  And probably if rates were raised to well above inflation that would help.  Say to 10 or 12 percent or 14 pertcent.

HA HA HA.   That's impossible because of a 5 decade long global DEBT BINGE.  If rates even get to 4 percent it is certain that the global credit markets will cease to function.  They will freeze.

And the only cure for that is massive bailouts.  Trillions and Trillions of bailouts.

When the economy collapsed and the credit markets froze under Trump they were bailed out with over 12 Trillion dollars.

How much will be needed for the next round of bailouts ?

We'll soon see.  And when we do only Hard Assets will bail out your personal finances.  Because paper assets will all be inflated away.

The FED DID NOT PIVOT: A STORM IS COMING

The Fed did not pivot.  Despite Wall Street's blowoff rally in face of a fantom Fed "Pivot" inferred from slightly lower CPI readings, every Fed head has come out to say they are still committeed to raising rates to fight inflation.

And in spite of a strange employment report in July, the announced corporate layoffs are accelerating, household debt is soaring, and corporate profits were NEGATIVE for the quarter when you strip out oil company profits.  And the yeild curve is inverted to an historically severe degree.  

All of which paints a picture of a misguided Fed raising rates into a rapidly slowing economy.

What this means is that at some point soon every asset (except the US dollar and long US bonds) will fall.  That includes gold, I'm afraid.  

I don't know when.  Neither does anyone else.

But the storm is coming.

And when it hits the Fed will finally pivot.  But then it will be late.  And they'll go back into Bailout QE forever mode.  And that's when only Gold and hard assets will protect you

Amazon Cut Its Staff by Almost 100,000 

in the June Quarter.      

Job Cuts Surge in June 2022, Up 57% From May,

59% From June 2021; 

Highest Quarterly Total Since Q1 2021     WORK

Mass layoffs and hiring freezes: 

Tech workers report huge drops in confidence 

in job security     

A wave of layoffs is sweeping the US. 

Here are firms that have announced cuts so far,

from Shopify to Peloton.

Peloton: Over 4,150 people

Shopify: About 1,000 workers

7-Eleven: 880 jobs

Vimeo: 6% of its workforce

Tesla lays off about 200 Autopilot workers and closes a California office as Musk staff cuts spread

• The cuts stem from slower business growth, paired with rising labor costs.
• The layoffs span across industries, from mortgage lending to digital-payment processing.

Why won't Gold break out?

 

Above is gold 2 year chart.  It's gone nowhere!  How maddening!   What a dog!

Above is the gold 10 year chart.  A bit better.  But really, not great performance!  What the hell kind of investment is that?

The gold 20 year chart.  Whoa.  That's more like it  that looks pretty good.  Not only that it's forming a long term Cup and Handle pattern   But how long will the handle go before another breakout?

Nobody knows.  But this is the point of owning gold in a period of unchecked money printing.  Over time it is an awesome investment.  During any period of a few years however, it might seem that a partifular currency is strong and stable.  Like the US Dollar.  

If you had owned gold over the last 2 years in yen or yuan or rubles or euros or rupees you'd be sitting at an all time high in the gold price.  But the dollar has been the least hideous of all currencies.  It has it's flaws: a massive debt, a massive current account deficit, a quadrillion dollars of unsecured derivatives written against it, and an active de-dollarization campaign being waged by China and Russia.  

BUT it's has the benefit of the world's deepest and most stable stock market as an anchor.  And that is what is keeping gold from breaking out in dollars.

What will or could change that?

Only one thing: the stock market finally topping out will start the rush to gold - And then a loss of faith in the Fed will send gold to the next level.

What could provoke such an event?  Another long term capital event, Another S and L crisis, Another housing debt Crisis, Another Covid type crisis, or any new crisis that will cause the Fed to have to print massive bailout trillions while inflation is soaring.  (How about a sovereign debt crisis infecting the world's banking system for example?)

It will happen.  Nobody knows when.  But in this environment sooner rather than later.

Patience.