May 2018 - Week 3 Edition
A Few Billionaires (the Smart Ones) Still Prefer Gold
Last week, I told you about a handful of billionaires entering the U.S. rare coin market lately, including two seeking the best-of-kind sets, as well as an Egyptian multi-billionaire putting half of his $5.7 billion net worth into gold. Later this week, we will hear about any change of holdings in the large hedge funds in first quarter. By law, large hedge funds are required to file their holdings within 45 days of the end of the quarter (May 15), covering their first quarter changes, so we will hear what John Paulson, George Soros and others are doing, but that news is already out of date. It’s more important to look at what the big money is doing lately, and that news is somewhat mixed.
This Monday, May 14, we learned from the latest “Commitment of Traders Report” of the Commodity Futures Trading Commission (CFTC) that money managers added to their net long positions for the first time in three weeks for the latest week reported (May 1-8), a week in which gold rose from $1,305 to $1,315, but most of that was short covering, since the funds had been net negative on gold so far this year.
General investors have been more bullish on gold, pouring about $3.1 billion into gold-backed ETFs in April, the best month for gold ETFs since February 2017, according to the World Gold Council. This surge in buying was due to demand for a safe haven in troubled geopolitical times, with fear of a trade war, unrest in the Middle East and possibly North Korea, and yet-unresolved challenges with Brexit.
This demand tailed off somewhat in May as the North Korean conflict appeared to be lurching toward some sort of resolution and the inflation numbers were reported to be fairly tame. The latest rise in U.S. interest rates has drawn more investors into the U.S. dollar, thereby pushing gold prices down in dollar terms. Also, May and June are two of the weaker months for gold demand – before the strong second half begins, with India’s monsoon season followed by a series of gift-giving holidays and the wedding season. It may be an excellent time to buy gold on the dips! Call us today to learn more!
How Smart Coin Buyers Can Become Multi-Millionaires
Most billionaires become that way by investing in themselves – by creating a business and pouring their profits back into the business they manage. For some select few businessmen, they turned their original business profits into a second profitable business – coin collecting. By learning all the details they could about that second business, they created an asset which turned a modest nest egg into a fortune. Some examples:
Louis E. Eliasberg, a Baltimore banker, accomplished what many thought to be impossible: In just 16 years, beginning in 1934, he assembled the only complete collection of U.S. coins – the only one that contained regular-issue coins of every denomination from every date they were issued and every mint that made them in those years. News of this achievement not only electrified fellow hobbyists but impressed the entire nation. It was considered so significant that Life magazine, then regular reading for millions of Americans, featured Eliasberg and his coins in a lavish photo layout. He began collecting coins to circumvent the Gold Surrender Order of 1933, which required U.S. citizens to turn in their gold coins but exempted collectible coins. “I realized the only way I could legally acquire gold was by becoming a numismatist, so in 1934, to the extent of my means, I started buying gold coins.” During the 16 years it took him to complete his collection, Eliasberg spent less than $400,000. When the collection was sold between 1982 and 2005, it realized a total of roughly $55 million.
John Jay Pittman, a chemical engineer for Eastman Kodak, was also a man of limited discretionary income when he began buying coins in earnest in the mid-1940s. But he had a razor-sharp mind and a keen eye for quality and value. He also had an uncanny instinct for spotting exceptional bargains. In all, his total coin collection cost him just a few hundred thousand dollars, but by the time he died a half-century later in 1996, his collection was sold off between 1997 and 1999 for more than $30 million. “John was not a wealthy man, except in knowledge,” a longtime friend recalled. “He was one of the smartest people I’ve ever known, with a wonderful memory, and he was way ahead of his time in terms of knowing which coins to buy. But he was on a definite budget.” Judged by today’s standards, coin prices were incredibly low in the 1940s, when Pittman bought many of his coins. Still, at a time when most collectors put far less emphasis on quality than on rarity, Pittman had the foresight to insist on the best – not only uncirculated quality, but also the very finest specimens he could afford.
Harold Bareford, a New York City lawyer, began buying coins the same time as Pittman, just after World War II. In 1947, he summed up his coin buying philosophy this way: “I collect only the finest specimens and am not interested in any coin which is not perfect.” He was also meticulous in the records he kept, making it easy to track the performance of his coins. His records show, for instance, that in 1947 he paid just $310 for a 1933 eagle ($10 gold piece). When his heirs sold it in 1978, it brought $92,500 – nearly 300 times what he had paid for it. And coin prices in 1978 were well below present-day levels. In all, Bareford’s gold coins fetched about $1.2 million – or 87 times his original outlay of $13,832. And they would bring multiples of that if offered for sale today. But Harold Bareford’s story offers a cautionary tale, too: He all but stopped buying U.S. coins in 1955 because, in his opinion, they had gotten too expensive, even though, of course, they were still tremendous bargains then!
Louis Eliasberg, John Pittman and Harold Bareford are all regarded today as great collectors. But none of them was born into wealth. All three developed a golden touch through reading reliable award-winning research material, showing close attention to quality and rarity, with a focused emphasis on set building details, while understanding that those who invest time and effort in the hobby will get the biggest return. Call an account representative today for more award-winning information!
Gold Slips Below $1,300
Gold closed last Thursday at $1,322 but it couldn’t hold above $1,320 over the weekend. Then gold fell below $1,300 for the first time this year on Tuesday morning, due primarily to a strong dollar. The strong U.S. dollar is putting a temporary lid on the gold price, as did the relatively low inflation numbers for the April Producer and Consumer Price Indexes. However most of the recent rise in oil prices has come in early May, so we may see higher inflation figures when the May numbers are released in early June. We don’t expect gold to stay below $1,300 long, so strongly consider buying on the dips, now!
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