5 Oz America The Beautiful Bullion

And you missed the part which read "considering prevailing market conditions" that immediately follows. You also missed the part which read
"as narrow a spread between buy and sell prices as prudent business judgment permits."

Their buy price is $1200 per set. Prudent business judgment doesn't require a negative spread -- it prohibits it. Nor does prudent business judgment mean setting a price where the product sells out as fast as the website allows.

That elephant is still there.

 

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No, I didn't miss it at all. I just didn't bother to address a non-issue that was disposed of in the linked Post #266. -- "The reference to "prevailing market conditions" most certainly does *not* mean the market in the very coin that you are undertaking to distribute! It means the general market for silver bullion. Suggesting otherwise is wholly disingenuous."

And the initial "buy" price is a function of the initial sell price that's established. Hell, if APMEX was allowed to sell these at $2,000 a set (which Gainesville reportedly was starting to do before the US Mint shut this all down), then the "buy" price could be established at $1,800 a set. Point is, the program isn't created to give an initial windfall to the primary distributors. It's about making the coins available to the public as afforable as possible and making the coins available initially at a price that is comparable to other bullion coins issued by soveriegn governments. If anyone is going to get a windfall, it should be either the Mint itself (taxpayers) or the purchasing public and not the annointed 11 private company distributors, who are trying to abuse their position as a conduit for the release of the coins. Keep in mind -- the Mint was only charging the distributors a $9.75 per COIN premium. It wasn't doing this so that the distributors could mark that premium up by 1,000+% and score a huge windfall profit.

 

Huh? You are making assertions on language that simply isn't there and is against the rules of legal construction. Remember, vagueness in contracts is construed against the drafter. The prevailing market conditions for a product take possible substitutes into account, but aren't constrained by them.

That claim is even more against the obvious language, since the Mint sets the initial "buy" price for the distributor without any offer being made. The spread referred to is for purchases by the distributor from other holders. You do understand what a bid/ask spread is, don't you?

I see we're in agreement that a $200 buy/sell spread is reasonable. Of course, if Gainesville did what you'd suggest, the people who bought at APMEX would sell at Gainesville and pocket an instant $400. The supply and demand have to be there to support the price.

The program failed when Congress and the Mint conspired to make too few coins. That's what created the windfall. The Mint decided who'd get the windfall, it wasn't you, and you're just upset at that. But you don't have any more right to it. You can make all the inaccurate assumptions you want, but the quoted provisions don't support them.

 

The question at hand is are these silver bullion or not? The government makes that call, and therefore decides how these enter the market. Until they are in the market, they are what the government says. The market for silver bullion is a global commodity and price fluctuates based on demand and is communicated openly. APMEX cannot shift the product to a new market and create a new bid/ask spread on its own.

After and only after release to the market, the market will decide if there is a change required...not APMEX. If I take a silver eagle to the bank they give me face value in the monetary market..$1. The bank then sells the same coin back into the market for a $1...that is their job as a distributor in the monetary system. They cannot sell it for more, even though it is worth more. The market must make the change, not the distributor within itself.

 

Agreed.
If I go to the bank and see a silver coin in the tray (which I do occaisionally), I get it for face value.
The bank is for-profit, however, dealing with public trust in disseminating our coins/currency, it can't charge me any more or less than the face value that public trust dictates.

The very few companies entrusted by the people to spread the bullion into the market for the mint should not be allowed a 'windfall' profit for doing so, beyond the price of silver from the moment of purchase to moment of sale. Silver goes up 200 bux, then great, they get a windfall... but just upon low mintage and possible numismatic interest, they should not hold the product for ransom. Truth be told, the mint should have sold these direct, so as not to even have dangled that carrot in front of the profiteers. Nothing wrong with profit, just this monopoly situation that is good for bullion, but not perspective rarities.

 

I'm not going to bother arguing this further with you. Those matters aren't even in dispute between the involved parties. Suffice it to say that not only do I see it differently from you, but so does the U.S. Mint and Apmex itself. The latest information from yesterday was the quote of the President of Apmex in the Wall Street Journal in which he described (consistent with the analysis I cited) what comparables he used for pricing. They were the 5 oz Chinese Panda, and the 5 oz. Mexican Libertad.

The focus of the dispute is centered on whether those two coins were acceptable comps to use, and whether any other comps are out there that should have been taken into account. I've seen reports that the Panda comp was based on a proof, not a bullion, coin with a mintage of only 10,000 (and, consequently, had a high price in the $400s per coin). The Libertad comp was reported to have an unlimited mintage (and, naturally, was priced quite a bit lower than the Panda -- in the 200s). Based on those two comps, Apmex settled on $279 for the price of an ATB coin. To my knowledge, there's been no explanation of why other coins weren't used as comps (such as the 5 oz. Australian Lunar). This is the realm in which the problem is, appropriately in my view, being hashed out.

 

I like the post that Ipomelia refers to in post #282. Can somebody invite him here and ask him/her to post here?

Does anyone know what the average markup has been in 2010 for US MINT "bullion silver"? I guess that might be hard to pinpoint.

Would it be fair if the US Mint instructed these bullion dealers to sell at that average if they wanted to remain in good standing with the mint?

 

Fine with me.

Which describes his process for doing so. Did you read the article? It doesn't claim that the Government is disputing his methodology. Instead, it comes right to the core of the matter: "How can you widely distribute 33,000 coins among millions of collectors who wish to buy these coins?

I submit to you that Mr. Thomas has far more experience and expertise in setting selling prices than you or I. His entire business depends on it. And oh yeah, results matter. However Mr. Thomas got there, the rate of sale to willing, uncoerced buyers show that asking price was reasonable.

 

If Mr. Thomas decided these coins, in there limited quantity, were not silver bullion as per the request of the US Mint...he should have returned his lot to the mint! It is not his job, as the bullion distributor, to decide bullion is not bullion and modify on his own. He is an expert. He knows his job. He CHOSE to jack price and profit. He was to release these coins into a global market that existed. He CHOSE to create a new market on his own...again, not his job in this circumstance!!!

 

While they are still government property, they can call them kumquats for all I care. It doesn't make it so. But the enabling legislation calls them both bullion coins and numismatic items.

Incorrect. Forward contracts can be part of any market.

Further, APMEX can call them bullion or not catagorize them at all and still sell them at a premium. Want proof? Just wander over to Goldline or look at the magazine ads for overpriced 1/10oz gold bullion coins. Once APMEX proposes a price and a willing buyer accepts that offer, that is the market deciding.

As for banks, suffice it to say they operate under different regulations than these distributors, making that analogy irrelevant. Nor am I sure your assertion is accurate. You may wish to research the Continental Illinois Silver Dollar Hoard. I don't know if the regs have changed since then.

 

This is the most bizarre argument yet. Check the site. APMEX sells different forms of bullion at different prices, depending on market desireability, including selling SAE's of different dates at different prices. So does your local coin dealer. It's not APMEX's fault that the Mint couldn't make enough of them to keep the market price down.

Again, if you don't think the premium is reasonable, don't pay it and laugh later. Others clearly do think its reasonable, because they put their money where their mouth is.

 

I'm just glad I'm getting a second chance. I got the APMEX email after the close of business on Friday when I was already on my way out of the city and I didn't check my email until Saturday night. I'll be happy with one for now. I'll be getting the Tall Grass Prairie one too.

 

Rather than making assumptions (which you chastise others for doing), playing Junior Associate (oh, and by the way, the applicability of the rule of construction that ambiguities in a contract are construed against the drafter is dependent upon the contract not containing a clause, quite standard, that the same are not to be construed against either party), and making admonishments about not reading, how about you do some reading...perhaps start with the posts earlier in the linked thread by the President of Apmex. Maybe you'll learn something about just how well he did at determining on what basis to price these coins.

And the answer to the question that is, as you put it, the core of the matter ("How can you widely distribute 33,000 coins among millions of collectors who wish to buy these coins?"), best was addressed by a poster on the other forum: "For starters, don't restrict supply even further by bundling them into 5 coin sets. Beyond that, if your argument is that these really are numismatic coins (fair point), then what you're really suggesting is that the Mint should market them as it does other numismatic coins -- and sell them directly to the public."

Otherwise, get a clue. It's not about whether the price was reasonable as determined under a "what the market will bear" analysis. If that was the standard under the Authorized Purchaser Agreement, then these wouldn't have been pulled from the market.

 

I did keep my money in my pocket.

Also, local coin dealers do not have direct agreements with the US Mint to distribute bullion. APMEX only had access to these as a bullion distributor. So they bought bullion from the mint, under a distributor relationship with the mint, with a less than $2 premium over spot per ounce (like all other bullion they buy from the mint), with an agreement to sell to the bullion market, with a reasonable markup (usually $3-4 in the bullion market)...then they turned their head, big smile came upon their face, rubbing there stubby little hands together, and sold the product to the numismatic market (NOT the bullion market) with a $20+ markup per ounce, with a minimum purchase of 25 ounces. The backing institution sold with a $2 premium to a bullion distributor who then acted like a numismatic retailer (the US Mint sells to the numismatic market directly, they do not need a distributor!!)

We can banter back and forth for days....it is a discussion of principle and intent. If APMEX lived on the principles they agreed to in a distributor agreement, there would be no issue. If the US Mint intended to sell to the numismatic market, they would have done it themselves, there would be no issue. The challenge is APMEX ignored their principles and the US Mint sold a high value product to the lower cost market.

So the US Mint took less profit in order to live up to their commitments even though technology challenges and unrealistic requirements from their governing body (Congress/Senate/Law as defined) would have allowed them to capture profits. APMEX leveraged their relationship to obtain a limited supply and sold their integrity for some extra $$. Both were at fault....one with a cause outside their control (Congress/Senate/Law) and the other with a cause completely within their own control (sell as bullion or sell as numismatic rarity). You pick which one you believe is better.

 

You guys can continue to bash APMEX, but I will stand on their side. I just got a large popcorn tin in the mail from them because they value me as a customer. There was regular popcorn and buttery corn, but the caramel corn won me over!

 

love it SilverCedar....very funny

 

Go to the top of the food chain. www.usmint.gov and see what the requirement for being an authorized purchaser directly from the U.S.Mint.
25,000 ounce minimum purchase for silver (currently about $725,000), a $2.00 per coin premium (another $50,000) and a net worth of at least $10,000,000 for the last three fiscal years.
Then to have them put into slabs (even in bulk-minimum 100 coins-another $1,000.00) is $10.00 a piece.
Then they have to make SOMETHING for doing it all, gotta' respect that!
A little rich for my blood. I'm happy working at the level I am.
John - SilverkingE

 

Breaking your promise already? What matters is that Mr. Thomas had the right to use any basis he pleased and the resulting price was proven to be reasonable in the free market.

No. That won't help, since the scarcity will still be there. The result would be a flash-crowd based lottery, followed by the "winners" reaping the same monopoly profits that APMEX is reaping now.

What I am suggesting is that the Mint go back to Congress and get the law changed to let them produce and sell sufficient numbers to meet the demand at a price which a) let's them recoup their investment in the program, and b) people can live with. My guess is that's about 200-250K per issue, but it could be as high as 500,000. So the Mint will also need an extension on the time caps.

You're making a big logical leap there between contractual rights and market power.

The Mint is in a tight spot. By law, They've only got until the end of the year to sell any coins. The Authorized Purchaser Agreement may give the distributors a right of second refusal or similar option as well -- I don't know and I doubt anyone here does. But it's possible and even likely that the distributors can't force the Mint to sell them the coins since the orders weren't accepted. The Mint also still has a trump card to play -- the law lets the National Park Service buy the any or all of the entire issue (in 1000 coin lots) and distribute it as they please.

That gives them some leverage over the distributors and State Oil Co. v. Khan gives them at least a limited ability to set a maximum resale price without triggering anti-trust laws. They tried "urging" a lower markup, but as far as I can tell the distributors were free to ignore that urging and did so. In other words, APMEX and the others had the right to set any price they wanted, but the Mint still holds the power to withhold shipment and did so.

In short, I see still see no abuse, and no violation of contract or statute by APMEX or any of the others. The Mint is in the fortunate position of being able to benefit from its own incompetence to force a change of terms and is doing so.

 

I think I saw (and bid) on one on Ebay in November. I believe it went to the high bidder @ $500.
It looked awesome. I was looking for a 5 Oz. Panda when I saw it.

 

I want some of what you're smoking! Now you're not even referencing the correct standard. The Authorized Purchaser Agreement expressly references that premiums are to be competitive with those charged for other bullion coins. So, no, he cannot use any basis he pleases as long as the resulting price is reasonable in the free market.

And I didn't promise a thing. I simply said that I wasn't going to argue with you over issues that aren't even in dispute. You're still floundering, but at least now you're in the general ballpark of where the issues exist.

Is that not what is likely to occur, in any event, when the Mint sells the 27,000 Uncirculated coins next year?

And if there is going to be anyone reaping windfall profits, better the Mint itself (by raising its own premium) or the public purchasers, not the middleman.

Going back to congress would be a sensible solution, though it likely isn't going to happen prior to December 31, and under existing law the bullion coins only can be made available for sale during the year in which the companion quarters are issued. So, there would be some risk, however minimal, for the Mint in taking this route. Nevertheless, I anticipate that it's one avenue under consideration.

The Mint is in no worse spot than the Authorized Purchasers, and likely in a better one. Right of second refusal? Where did you go to law school, bud? -- it's a right of first refusal, and it's *highly* unlikely that the same exists -- another non-issue.

Again, no, Apmex did not have the right to set any price it wanted. It has a right to set *a* price, subject to the terms and conditions of the Authorized Purchaser Agreement. See above.

The Mint may or may not be incompetent. But, if so, no more than Congress for saddling it with exact specifications for the coins that turned out to create significant technical problems with striking them, resulting in big delays throughout the year. In any case, the most glaring incompetence is being exhibited by Apmex et. al., who doesn't seem to recognize a good thing when it has one (a 10 year program of auto-income), and who seems determined to gorge itself on profit, at the expense of the goodwill shown by the Mint in charging it a premium of only $9.75 per coin, the goodwill of its customers and the public at large by flipping them off while it clings to the massive potential profit-pie, and its own goodwill if the result is that the Mint now cuts them out of this program entirely.