Beware: The Ide(a)s of 'Rare Coin' Dealers

An analysis of the ‘rare-coin’ industry

An expose' of the Pirates of the precious-metals

underworld and how you can truly protect your ass-
ets - from them!

What you about to read is excerpted from a series of

emails, which I began to receive on the evening of
January 18, 2006. Due to another lengthy e-mail
exchange, which had taken place over several days
in October 2007, and so we have chosen to repost
this lengthy column - hoping to save others from
similar fates.

If you are not familiar with gold and silver or the so-called “Rare Coin”
market (which is loosely aligned with it), nor some of the reasons why
these goods are sought after all over the world, then this column will have
little meaning to you, however it is our intent to educate you as to the
pitfalls of what some call, ”the Industry.” What follows his inquiry, was my
response to him. - J.B.

Ladies and Gentlemen:

My spouse and I are about to become first time investors in investment
grade coins (IGC). We've researched various websites and must ask in
what manner do you arrive at the MS grade of your IGC's. It's our
understanding that IGC's are generally scaled starting at MS65 and higher,
which is why we pose this question.

Also, have we overlooked your daily prices for gold and silver coins on
your website? Or does one get this info. solely by telephone?

Should there be a financial crisis, i.e., collapse of the U.S. dollar, how
would the owner of IGC's redeem them for services, goods, etc.? It's our
thinking that IGC's could become a high end means of bartering when
considering the fact that financial institutions might not be available to
transact the sale of gold to paper money. Yes? No?

Lastly, do you sell IGC's via credit or debit card accounts?

Thanks in advance for your response.

Good Evening Sir and thank you for your inquiry.

You have opened up an interesting can of worms here, so please bear with
me.

The first thing I will say is "buyer beware." The "IGC" (Investment Grade
Coin) or Certified "Rare Coin Market" is a relatively thinly capitalized
market, which has been abused by many an unscrupulous dealer over the
past quarter century and unfortunately - it is the buyer, who is usually
being abused. More on this topic momentarily.

As for daily prices on our website, you'll note that most of the coins
represented are fairly generic in nature, historic in value but not what I
would refer to as investment quality - other than investment for security
against a faltering economy. Given the current financial situation our
country finds itself in - what better time to address our financial foundation
- hence, what you see on our website. Prices change on a moment-to-
moment basis and we can ill afford the necessary computer software,
which would automatically adjust the prices with the changes in "spot" gold
or silver.

As I conduct business with each client in order to meet their specific

needs, prices are locked in at the time of sale at the prevailing rate.
However, at our firm, we offer a fairly simple procedure, which no one in
the industry will offer: on fractional, International gold specimens, your cost
will range between three and ten percent above our cost, depending on the
item and the volume purchased.

As to your question as to how we arrive at the MS grade of the coins,

which we offer; that question would not apply to the coins mentioned in the
previous paragraph, although most of those have never been placed into
circulation and all of them were minted prior to 1933 - making them at
least, historic in value. Your question would however apply to what you
refer to as IGC's. These would be "investment" grade coins, each of which
will have been graded by a third-party, independent, professional grading
service, such as PCGS (Professional Coin Grading Service), NGC
(Numismatic Guarantee corporation) or ICG - each recognized as standard
bearers within the industry.

08.18.10 NOTE: We do NOT recommend the acquisition of any coins

graded by a firm known as ʻICGʼ – only those recognized in the industry by
PCGS and NGC. (JB)
In theory, the reference to MS-65 or higher being considered to be the
most desirable is generally true - however that does not mean that any
MS-65 or higher will even be that desirable. If the supply is extremely low
and there is no market for that item - then you have just become the
"collector" - for you may never recover your investment. Also, one must
understand, that just because an MS-65 or MS-66 has been awarded that
lofty level (certainly not the highest) no longer means that it will "perform"
well. A common coin - no matter the grade - is still a common coin and yet
what you may be able to purchase that coin for, may well position you for a
pleasant surprise in the not too distant future. In order to better understand
this, please allow me to give you a little homework assignment before we
speak. Based upon your comments and question, I assume that you have
been speaking with some other firms. I have no problem with this as it can
give you an eye-opening education.

Homework - Part 1: Contact at least 3 firms of whom you may be familiar.

They may be firms with whom you have spoken with or found on the
internet. Ask of their current price on a common date, Certified (slabbed/
graded) MS-66 Saint Gaudins $20 Double Eagle. Tell them that you are
considering purchasing a number of them.

Now, let's see what kind of quotes you get. I can guarantee you that
several or all of them will be (as of 01/19/06) in the $3,595.00 range. You
may find slightly lower prices if you really push - but the standard in the
industry for a specimen of this caliber is a 40% markup. Unacceptable in
any industry in my estimation - and that does not just apply to the higher
grade coins - and now you see where the "abuse" comes in.

Glowing promises will be made of how, "This coin once sold for "x" and
today, with the current market conditions, they are poised for dramatic
movement once more. Historically, when gold doubles in value, these
coins gain at least three to four times." I am sorry sir - gold HAS doubled in
the past five years - and the certified, high-grade coin market has
remained relatively flat. Yes, there have been gains - but nothing like those
promised.

Homework - Part 2: Pick up the phone and call me and I'll then tell you
what our firm offers those very coins for. You will be shocked at the
difference. It is your money and you want the best value for it. I will provide
that.
I would like both you and your wife to understand that I am not against,
what you call IGC's - I am just aghast at the hundreds of thousands of
novices, who are taken - or bilked - out of millions of dollars every year
because of the hype of some slicky-boy who sits on the phone and "sells" -
yes - "sells" you a product, which he/she knows nothing about - just
because some "recruiter" he/she met at a bar told him how much money
they could make as a "broker" in the "rare coin business."

Personal History: I will be fifty-eight in February

(2006). When I was ten years old, my grandfather
sat me down in a bank vault and gave me quite a
lesson in the history of money. On that very day, I
began to purchase old silver dollars out of a bag in
that bank vault - you could still do that in 1958 -
when our money was still real. I paid a paper dollar
for a silver dollar. I asked him why we were doing
this, and he said, "Son, one day they will take the
silver out of our money in the same manner that that
son-of-a-bitch Roosevelt did with our gold in 1933"
Six years later Gramps was proven to be correct.

By age twelve, he began to take me to coin auctions and estate sales,

whereupon I began to purchase a few small, moderate gold coins. As you
may recall, few people were allowed to own gold back then - other than in
the form of jewelry or coin collections. Many who owned gold coins were
still scared to death of the ghost of FDR and his gold-grabbing cohorts -
but true coin collectors knew what the rules were and what they could
legally own. It was those people, who my grandfather introduced me to -
and I have been a collector of specie since that day. Yes, all these years
later, I still go to auctions and still purchase collector AND investor grade
coins - in gold, silver, nickel and copper. Some I purchase for the same
reason you seem to be considering - investment - not so much for myself
any longer - but for my granddaughters. It never dawned on me until I was
42, that one could actually make a comfortable living providing both
investment grade coins and security to desiring clients and collectors - and
16 years later I am still doing it.

Many of the folks, who you will talk to in this "industry" have been doing it
for three years or less - and they are still "selling" you what their bosses
want you to buy - a bill of goods. They are all hopping on the bull-market-
in-gold train and that is all they know. Enough on that topic.
Consider the following: When building a home, where do you begin? Do
you get a bunch of friends to come over on a Saturday afternoon to "raise
the barn?" Do you start by putting up the walls first, then the trusses and
roof sheathing, etc.? "Oops, baby. We have to have everyone back next
Saturday to pour the foundation!" Consider the purchase of gold and silver
much like building that new home - you begin with the foundation - 90%
junk silver, 1 oz. silver rounds, small, fractional gold coins - all of which
could be used for barter and trade. Once you have that "first bag" put
together - then - and ONLY then, do you want to consider filling your
"second bag" with quality, investment grade coins (IGC's).

The Rules of Thumb: There is an old adage, which says, "You buy silver
to sell and gold to hold." In simple terms, it means that you sell silver when
it has made you a killing of a profit (which it will soon do) or when you need
to put a bag of groceries on the table (gallon of milk, loaf of bread and a
package of hot-dogs). Like your checking account - it is to be used for your
"daily loaf of bread." But gold? You buy it to hold onto - much for the
reasons of which you have approached me - until you just can't raise
enough cash to replace the roof or pay the taxes. Gold should be used like
a savings account - a security blanket. Can you eat it? No - but for
thousands of years throughout the world - gold (and by extension, silver)
can in many cases be used for "barter" or converted into the local currency
of choice.

Allow me to address the "financial crisis" portion of your note: It's quite
simple, contrary to what you may have been told (and I can fairly well
guess by whom) during a financial crisis or collapse of the U.S. Dollar - NO
ONE IS GOING TO CARE THAT YOU OWN AN MS-ANYTHING! When
our system gets to the point of financial Armageddon - and ALL fiat
systems do - all anyone will care about is the weight of the gold - or silver.
Rarity and grade will become valueless!!! The only people who will want it
will be the robber-barons, who are left - and they'll want to steal it at cents-
on-the-dollar.

A Modern Horror Story: Recently, I had a gentleman contact me from

Texas, who in the year 2000 came to a personal decision that he wanted
to diversify his investments into gold. He set out to find a dealer who would
provide the basic, simple "ounces of gold" that he felt would fit his needs.
Because of an ad he had heard on the radio, he contacted a "Rare" Coin
firm in New Jersey, who smoothly convinced this gentleman to purchase a
selection of certified (slabbed) "rare" coins, promising him untold multiples
of profit in the few short years to come. The profits never came - even
though he had been told that "when gold doubles in value, these rare coins
traditionally have tripled or quadrupled in value." Since 2000 gold has
MORE than doubled in value - and yet the value of his "rarites" had
declined by over 52% - in part because he had purchased common-date,
generic coins at industry standard overinflated prices (estimated 40%
markup). His $19,000 investment brought no more than $9,052.00 in
October of 2005 - and yet - if he had only placed his original investment
into common bullion coins (American Eagles or Canadian maple Leafs) or
even pre-1933 British Sovereigns (genuine "coin of the realm") - his
holdings today would be valued at approximately $38,000 (approximately
$51,000 as of 10/07).

In late November of 2005, my new client has started over and is on his
way to recovering the losses of an ill-advised "investment" - and the barter
or exchanging of a quarter ounce of gold will be much easier than
swapping an MS-65 common-date Double Eagle for a Double
Cheesburger at Mickey D's.

Fini: I believe that the first thing that I can help you
do (after your homework) will be to assist you in
determining exactly what it is that you and your wife
are attempting to accomplish. It will be from that
point, that we can determine the wisest path for your
"portfolio" - and I DO hate that word.

As to your final question, at our firm, the acceptable

forms of payment are personal check or bank-wire
transfer. The credit card companies are making too
much of your information available to those who don't
need to know - and besides - they charge us 3% on
the gross sale. In order to keep our prices down, we can ill afford to absorb
this expense.

As I intimated at the outset, this would be a lengthy response and yet I

hope that it has been helpful. I am by no means attempting to sway you
away from your initial direction, but by education, attempting to help you
redirect your thoughts on the issue. I would happy to assist you in these
endeavors and be proud to serve you and your family for years to come.

~ The Ide(a)s of 'Rare Coin' Dealers - Pt. II ~

Following is a continuation of the e-mail dialog, from above. (JB)
Whew, what a great and educational response to our questions. Please
refer below to my response and/or questions to your comments. We
appreciate the time and consideration that you're providing us.

I appreciate The Two Rules of Thumb. Yes, we want to invest in gold and
silver primarily to prepare for a potential collapse of the US dollar. Other
websites have indicated that one should avoid buying gold and silver
bullion because the government could do again what it did during the
Roosevelt years and confiscate it, but the Gov't can't legally confiscate
coins. We take this with a grain of salt, so can you shed light on this issue.
You say that in a crisis the weight of gold and silver is what anyone will
care about; thus, bullion would work as well as coins, right? Also, my
brother-in-law says that buying w/gold and silver during a financial crisis
would likely invite aggravate theft. There's truth to this logic, so would it be
wise to retain gold and silver in a bank safe deposit box or in the home
under lock and key? Also, we've read that banks can legally deny its
customers access to their safe deposit boxes during a financial crisis. Yes?
No?

As you know, I'm an IRS employee and have participated for years in our
Thrift Savings Program. Though my funds are providing excellent returns,
I'm reading and sensing that it'd be wise for me to take a loan on a portion
of these funds to apply towards the purchase of gold and silver. Some
folks think I'm fool hardy (because the price of gold is so high right now),
but we think it's a wise move because it's an investment that'll provide an
added and lifelong sense of security for us, our children, and
grandchildren. I'm awaiting word on my loan application that will provide
$10,000-$15,000+ for these investments.

On the face and delivery of your response, you seem like a damn nice guy
and a straight shooter, and this observation comes from a guy who served
in various capacities as an Army recruiter for 10+ years.

Your response to these questions will be appreciated.

Thanks again,
(Names omitted for privacy)

Mistakes do happen and given the time of year it is for you - I'll allow it.
The name is Jeff - not Bill. Just funnin' ya' so don't be concerned.
I also am happy that you took the time to read before we got together - it
clears up a lot of detail early on - and I hope has answered as many
questions as it raised - and it sounds like it has.

On to your next set of questions: As a rule, I make "bullion coins"

available to clients who are absolutely insistent, however I do not
personally own any for the reasons everyone in "the industry"
acknowledges - a fear of the ghost of Roosevelt. In 1975, when our
"privilege" was restored, allowing us the ability to "own gold" once more - it
was just that - a "privilege" granted by Big Brother. It is commonly believed
by most that, at the time of FDR's dastardly deed - that we were the only
ones being raped - in fact we were the last. The die had been cast
amongst the "free nations" of the world - and the global depression was
upon us all.

Paragraph 2, Section ʻBʼ of Rooseveltʼs Executive order, specifically

exempted coins having, “a recognized special value to collectors” from the
confiscatory requirements of the Exectutive Order of April 5, 1933.

From our Catalog:

The provisions of the Gold Reserve Act of 1934 and the Executive Orders
and banking laws of 1933, which originally demonetized and confiscated
all outstanding gold coin in the United States, prohibited the individual
possession of gold bullion (or any other recognizable use of gold as a store
of value). However, they ... permitted the retention of gold coins of
"recognizable numismatic value." Failure of the original legislation to define
adequately what constituted recognizable numismatic value caused
considerable confusion for some years, but in general, the parts of the gold
regulations concerning numismatics were not rigidly enforced - at least not
to the point of harassing collectors of gold coins.

In 1954, the Treasury Department recognized at last that the time had
come to legitimize the numismatic gold market. Consequently, an
amendment was made to the Gold regulations, to the effect that all gold
coins minted prior to 1933 would subsequently be presumed to be rare and
of recognized special value to collectors, without the necessity of further
specific determinations by the Treasury. All U.S. gold coins and the vast
majority of foreign gold coins were thus freed from the overhanging threat
of confiscation...

Anyone who says that “THEY canʼt take it” is a fool. Just consider the
economics of the land today and the indebtedness of our nation to the
world – the Piper must be paid at some point – and gold has proven to be
the answer throughout history.

Question: “Would it be wise to retain gold and silver in a bank safe deposit
box or in the home under lock and key? Also, we've read that banks can
legally deny its customers access to their safe deposit boxes during a
financial crisis. Yes? No?”

Your brother-in-law is not totally incorrect, however if I am

to own specie, I want as few people to know about it as
possible and I most certainly would not put it into the
hands of the International Banksters. Get your own safe.
As relates to the bankʼs ability to block you from your
goods during a financial crisis, the answer that question of
course is, “yes!” If you do nothing else, donʼt wait until next
Christmas – watch the movie, Itʼs a Wonderful Life as
you consider your own question. Fear was put into the
minds of the depositors of the Bailey Building and Loan –
and it created a run on the institution. Itʼs just a small
example of what Roosevelt did during his first week in
office – and a sign of what was to follow.

This happened in about 1992 to a bank in Texas – on a Friday afternoon,

when the F.D.I.C. took possession and prevented depositors from gaining
access to their accounts until later the following week – and that included
their deposit boxes full of their “goods.”

Stating what I have about bullion and overpriced (by most dealers)
numismatics; please allow me to suggest several alternatives for your
consideration. Given the statements made within the above section from
my catalog, there are alternatives – small, fractional gold coins from
around the world, which are considered to have “historical” value – and
would include carefully selected, affordable American issues.

Once again, I am not against putting funds into certified, high-grade coins,
however with the funds you have suggested that you are going to work
with at this time, prudence would be wise. If you had ten times that amount
to begin with, my recommendations would be the same – except that I
might suggest 20 to 25% of those kinds of funds going into selected true
rarities. I may cover this more toward the end of this lengthy response.

I think that there are numerous variables, which I am not privy to at this
point, which can make a difference in oneʼs decision. Your age; how close
to retirement; the ages of your children; short-term goals; long-term goals
(financially and otherwise) and your own honest opinion of where you
believe that the economy of this nation is headed. In your case – it must be
difficult to separate “church and state,” so to speak. I do not envy you in
that respect.

As to gold being high priced right now – as compared to what? Five years
ago? Of course. The reality is that while gold has more than doubled in the
past five years, the dollar (at this time, still the international currency of
choice) has lost half of itʼs REAL purchasing power. Your wife can see that
when she goes to market. You can both see it at the gas pump. Neither of
these two items are included in the REAL inflation figures being dispensed
out of Washington as they were 25 years ago, when inflation was
acknowledged at twenty to 22% - at the time gold went to $850.00 per
ounce. The truth is that the Great Wal-Mart of China is both a blessing and
a curse to this nation; providing products at lower cost than anyone else on
the planet – all while we finance our own demise by selling our country to
China. If they cash in their American chips – we might as well cash in ours
– but not in the same fashion.

For over six millennia, gold and silver have provided a stable foundation for
any family, merchant or nation, who have had the wisdom to hold onto it.
Why do governments teach us to believe that gold is an archaic relic – but
they clearly hold over 70% of the worldʼs known supply. They still trade
with it amongst themselves and yet they tell us to “do as we say, not as we
do?”

My personal goals are for my grandchildren as I continue – no matter the

cost – to add to their own holdings. As with your own children – what are
their chances in the future if we do not lay down a solid foundation for them
today?

Economistʼs from around the world –

those who have nothing to gain by the
sale of gold or silver – believe that we
have only just now entered the second
leg of this long term upward trend. Some
estimate that gold may reach as high as
$2,000. to $3,000. an ounce. I pray not
or itʼ truly is all over. I tend to be more
conservative at a $1,000. to $1,500. Yet,
if all gold should do is reach itʼs previous peak ($850.00), silver could
easily go from itʼs present value of (about) $9.00 per ounce to $50.00 per
ounce or more. Iʼll let you do the math.

Does that mean that you should do a complete turnaround and put it all
into silver? I donʼt recommend it. Silver is much heavier and too bulky to
transport “quietly.”

Based on general assumptions and not having answers to the rhetorical

questions I posed to you above, my recommendations to you might include
the following:
1. Approximately 15 to 20% of your designated funds into silver. As
to what type? Either “junk silver” or pure 1 oz. silver rounds or
American Silver Eagles.

2. Approximately 60 to 80% of your funds into a diversified selection

of gold coins, offering your family security against the continual
foolishness and mismanagement by pollyanna-ticians, growth
potential, minimal down-side risk and the beginning of what could
prove to be a life-long love of “coin collecting.” Weʼll talk about that
more in detail when we speak.

3. There are some exceedingly spectacular arenas in high-grade

numismatics, which no one has probably shared with you. We can
talk about them and you might find them of interest due to the fact
that you can acquire higher grade than in gold – for far less money –
and historically they have outperformed – whether gold or silver
have moved or not, therefore you MIGHT consider earmarking up to
20% of your funding into that arena.

Allow me to tell you about my 5 1/2 year old granddaughter: – she has
grown up in my offices and studio and knows what REAL money is. When
she comes over, she asks, “do you have any gold monies Daddo?”

Once again, I hope that my commentary has enlightened your thoughts on

this subject and I hope that I have answered your questions.

I look forward to speaking with you at your convenience.

(signed)
Final Notes: Since the original publication of this column in January of
2006, “spot” gold had gone from $535.00 per ounce to over (as of October
22, 2007) $750.00 per ounce – a 40% increase – while, some better-date
certified $20 U.S. gold coins have lost more than 50% of what unwitting
customers PAID for them. From the wholesale level (the price dealers
must pay the importer/suppliers) common-dates have stayed about even.
In the scheme of things (and it is a scheme); in 17 years, I have only
known of three "investors", who actually made money after having
purchased common-date, historic, pre-1933 US gold coins. If you are truly
concerned with "Protecting Your Wealth" - then you would be advised to
stay away from the Zurich-Americans and the coin companies named after
private jets and muffler repair establishments or you might drowned in one
of those 10,000 lakes. Consider the following....

Another Modern Horror Story:

On Saturday, October 20, 2007, I received an email from a gentleman,
who had been "sold" a group of eleven, MS-63 PCGS/NGC certified US
$20 Liberty Double Eagles. The first coin was sold to him in September of
2003 and the final coin in July of 2006. Part of the "sales hook" was, that
each of the eleven coins were San Francisco Mint issued, minted from
1892 through 1902. Frankly, these are nice coins to have and to hold - but
PART of a complete collection - which might include a complete run of the
San Francisco issued coins in the series, beginning with 1877 and
continuing through 1907 - and this would be for the 'Type 3' series alone.

Purchase Price?: $40,000 - INFLATED RETAIL. If purchased through us,

the total cost would have ranged between $29,350 and $31,680 at that
time.

Actual Cash Value (wholesale) 10/24/07: $16,549.00 - a loss to the client

of nearly 60% of what he had originally been paid. The customer would
have lost far less money dealing with us - but the point is - he still would
have lost - due to market conditions - NOT because he had been ripped off
to begin with. Since the time of the first coin purchase on September 5,
2003, until October 24, 2007 - gold had more than DOUBLED! What
happened? Spot gold on the original day of purchase was $376.00 per
ounce. On October 31, 2007 it was nearly $796.00, and as of this update
(August 18, 2010), spot gold is registered at $1,225.10

Weʼre not talking about true, rare-date coins here – that is a completely
different kind of market – much as collectible, rare works of art by the
masters. In addition – weʼre not talking about what the coins were “sold for”
in January of 2006 – but what their REAL VALUE was at that time – not
the inflated market created by a suspect band of pirates.

By the way - if this client had put his original

$40,000 into the old, mundane British Sovereign
- he could sell out his position TODAY and
realize a net PROFIT in excess of $90,000
(August 18, 2010).

UPDATE: In a discussion with my importer, my

representative admitted to me that I am correct; Even though the "value" of
gold had more than tripled in the previous six years (2001-2007) - in fact
the REAL wholesale value of common-date, certified "(non) rarities" had in
fact remained flat and in many cases actually declined - and this guy is
paid to sell me this stuff.

In the early 1990's I represented a well-known National "Rare Coin" firm in

the southwest part of the country. The actual motto of the sales manager
(whom we referred to as "Straw Boss") was, "This shit isn't for buying - it's
for selling!" So much for the 'Christian' attitude of preserving the client's
wealth. Stick with the volume purchase of private gold and you'll actually
come out much further ahead - both in wealth preservation and probable
financial gain.

Fini: In closing, all I can advise you is to BEWARE of the Ide(a)s of the
Rare Coin Pitchman, as the buyer of these over-priced “rarities” rarely
comes out ahead. Your "broker" is called "broker" for a reason - once you
have purchased the over-priced coins - YOU are the one is is broker!

BUY GOLD AND SILVER - BUT BUY THEM WISELY