Saturday, June 11, 2011
We just returned from Nemacolin Woodlands Resort in Pennsylvania, where we held our annual Spring Editors Conference.
Porter asked Van Simmons, the president of David Hall Rare Coins, what he's buying today. Van is one of the world's top experts on rare and collectible coins. He is the co-inventor of the Professional Coin Grading Service (PCGS) – the most respected rare coin appraisal service. His clients are some of the wealthiest people in the world.
Van deals in a variety of collectibles... art, antiques, guns, watches. If it's a good value, he'll buy it. To give you an idea, I'll share the most famous Van Simmons story... Years ago, he brought a 10-foot, stuffed Bengal tiger home to his wife. He bought the tiger for $2,000 from the trophy room of a southern California museum owner. He then sold the tiger for $10,000. A year later, the same stuffed tiger sold at auction for $50,000. You can read the full story here.
Van's favorite deal today is more common, collectible gold coins – including "extra fine" $20 Liberties and "brilliant uncirculated" $20 Saint Gaudens. He said the premium over the spot price of gold is near the lowest he's seen in 50 years – around $100. With gold bullion selling for around $1,500 an ounce today, these coins would sell for around $1,600.
Gold stocks are also cheap compared to the price of gold. And as Porter noted, the fact that gold stocks and rare coins are near record-cheap compared with the price of gold means one of two things... Either those two assets are actually cheap, or gold is overpriced.
"This is not what a top in gold looks like," Steve Sjuggerud interrupted. Steve said at the top of a bull market in gold, we'd see the premium for numismatics soar. And gold stocks, especially junior mining stocks, which have been stagnant, would rally.
"Let me tell you a story about what the top in the gold market looks like," Van said. In 1987, when gold hit an intermediate peak, Van was working from 2 a.m. until 7 p.m. He had stacks of cards on his desk with names of people who wanted to buy rare coins, sorted by their time zone. He spent all day catching up on his leads.
"Hello, this is Van Simmons from David Hall Rare Coins. I believe you'd like to buy coins?" he would say. When the person replied yes, Van's script went like this...
No one flinched at Van's demands at the time. But after 1987, gold prices fell for more than 10 years. Today, people are selective with their rare coins, Van said. They only want top quality.
Gold prices can't go up forever, as they have for the past 10 years. But we've got some time before the top.
As we've advised many times... your best protection from a collapsing dollar is gold. And nothing beats holding real, physical gold.
At the conference, Van also addressed the question of whether all the bullion exchange-traded funds (and other gold-investing vehicles) really have the physical gold in the vaults. He was playing golf at an exclusive West Coast country club with the CEO of one of the world's largest gold companies. He asked the gold exec if the world governments, ETFs, and other large gold owners actually owned the bullion they claimed. "Of course," the executive replied. "I just saw it."
Then Van called one of the world's biggest commodity traders – his personal friend – to ask the same question. "That's bulls**t, Van," his friend said. "In England, it's against the law to see the gold. And you can't audit it. It's not there."
We can't know for certain whether these entities actually hold the metals. But that we're even asking the question makes a strong case for holding bullion in lieu of ETFs and other vehicles.
Our friend Doug Casey also spoke at the conference. "Everyone has to be a speculator," he said. Doug made his fortune as a speculator. And he told everyone about his favorite speculations today.
According to Doug, good speculations take advantage of "politically caused distortions." Take buying gold at $35 an ounce in 1971 when the U.S. dollar was still on the gold standard. It was an ideal speculation – Doug called it "the classic speculation in our lifetime."
A good speculation is always a low-risk speculation. And when you bought gold at $35 an ounce, your downside was zero.
Government meddling makes it impossible to do anything smart with your money other than speculations. Saving is foolish, Doug said, because if you're squirreling away dollars, you're hoarding a soon-to-be-worthless asset. And investing – which he defines as allocating capital into businesses that will grow the capital – is extremely hard when government is warping the market's normal functions.
Speculating... taking advantage of these politically caused distortions... is the only way.
Doug's traveling through the Middle East to look for speculations. He's visiting Israel, which he believes could become a major exporter of hydrocarbons. Then he's going to Cairo, where a friend of his has raised $40 million to buy rent-controlled apartments for around $27 per square foot.
Doug's friend made a fortune doing the same thing in the midst of a crisis in New York City in the 1970s. He thinks he can renovate these Egyptian apartments and sell them for 10 times his investment.
Of course, not many folks have the interest or ability to follow Doug's lead in the Middle East. So where else can you find bargains? One asset Doug believes is cheap is also one of our favorites – natural gas...
The International Energy Agency (IEA) said the abundance of cheap natural gas, China's booming demand, and the political consequences from the Fukushima nuclear disaster has created the "golden age of gas." The IEA said global consumption of natural gas could rise by more than 50% over the next 25 years. And it will account for more than a quarter of global energy demand by 2035, up from 21% now.
Frank Curzio has talked about the natural gas "megatrend" in his Penny Stock Specialist advisory for months. At our conference, Frank said the coming natural gas boom is why every major oil company is spending billions of dollars buying up natural gas assets in some of the biggest shale areas in the U.S. For example, Marathon Oil spent $3.5 billion to buy a stake in Texas' Eagle Ford shale assets.
After months of research and talking to his best contacts in the industry (some with over 30 years of experience), Frank has compiled a list of several small-cap companies that will soar during the natural gas boom. Some are natural gas producers that own property right next to where Big Oil is buying... Others are "picks and shovels plays" that are printing money right now due to the explosion in demand for their drilling specialties. Frank has five companies in total. To learn more about the natural gas boom and receive Frank's special report, click here.
Date Range:6/2/2011 to 6/9/2011
Date Range:6/2/2011 to 6/9/2011