coin investment

I read the article in the last issue of COINage concerning the removal of rare coin investment from individual retirment accounts.

I thought the article was very well written, and interesting because I never knew this could ever be done, but I feel it is rather unfortunate that the option was removed.

So I had a few general questions to those that might know more on this subject. Did this tend to inflate the coin market, overall? There's a lot of money in IRA accounts floating around out there, so I image that much money flowing into the market had somewhat of an effect on bullion prices if nothing else. Did the market drop off pretty heavy when they ruled out this option?

And, finally, what was everyone's overall feeling on this? Was it a good idea?

I thought it appeared like a good idea on the surface, but I could certianly see some inherent flaws. I know a lot of people here think a coin collection is not an investment, but I disagree with that to a certain extent. I think it is an investment, in so much that it has a good possibility to accrue in value - particularly over the long time horizen - like any other stock or market. But like investments, you have to educate yourself about what you are buying, or you will fall on your backside pretty quick, and it never hurts to consult an expert in the field before you make your bigger decisions.

 

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I'm no expert in anything but I have the understanding that to use gold or gold coins for an Ira account, those coins,(or gold), can not be in your hands. So basically, you get a print out of your gold account. Now since most of the world saves gold for a collapse in their local government or economic disaster, then what's the point of having a piece of paper. It's like buying a gun to go hunting but the store holds the gun and you throw your receipt at the turtle.

 

GET THE TURTLE!!

I would assume you are right with the holdings issue. Much like you cannot have access to the money in your account, immediately at hand - otherwise the interest would be immediately taxable as well.

But I don't know that I would go so far as to say the reason for investing in gold and silver would be expectations of government collapse or economic disaster. I think bullion has a market, just like any other commodity, so it could have an expectation of market expansion just the same.

If the S&P averages 6%, and gold goes up 10%, then that would have made it a smart investment on its own merits. As well as the same as rare coin trade.

In fact, it might serve to stablize the market for rare coins, as well, in as much as it gives a default value to the supply chain... like the government bond serves to evaluate acceptable risk.

 

yup just like the old guy said on the italian job after they got done stealing the gold... what is he gonna do with his share... why... invest in gold

 

I know where you coming from Rick. In the USA, our dollar as you know is so strong that it is the preferred currency of choice in the world today, (outside of Western Europe), so gold is traded for other then the reasons I speak of by most. I happen to feel that my investments in land, home, pre-paid college plans, stocks and bonds are all good faith investments in the future of our nation. However, when it comes to Gold, I follow the world outside of the West that feels it is to ensure against the unthinkable and could always be passed down thru the generations in private. Since this is Coin Talk I should add that I am a big fan of gold coins. They are easy to store, always easy to find a buyer without testing, like bars, and fun to have. What fun is it to look at a bar. If my wife could have gold Jewerly, then I could have my coins with their beauty and history. I just wish I had more but my kids like to eat, go figure.

 

Do you mean the coin market dropping off? No. IRAs were never a big part of numismatics, and neither were coins measurable in the IRA markets.

Was removing coins from being allowed for an IRA a good idea? It makes no difference to me. They are not the same thing at all to me. I never mixed them.

Do you mean, is a "numismatic IRA" a good idea? My opinion is "no" for the reasons cited: you cannot control the inventory.

When you buy 1000 shares of Intel, each one is exactly like the others. If you compare Intel to Westel, everyone knows the public information: who the big stockholders are, who sits on the board, how many shares are issued, incomes, earnings, regulatory problems, etc. Prices can be watched on a moment-by-moment basis and prices are recorded and reported through goverment-regulated systems. There is no difference between whiolesale and retail. (It is true that certain fixed costs and certain charges on "odd lots" penalize the smallest buys of a share or two or five or twenty up to 100.) Buy 1000 shares or 10,000. I believe that something like 640 million shares of GM Common issues are out there and they all have the same price -- regardless of how many you buy.

We do not even know how many Morgan Dollars there are, how many lLarge Cents, etc. etc. Grading is subjective. Price guides abound and they all differ. Numismatics has a huge wholesale/retail mark-up and volume purchases make a difference.

Stocks are regulated by the SEC, of course, but in addition, a company has to EARN its place on the NYSE or American, or even the smaller ones like Midwest. You have to register and prove you deserve your place. So, if you have, say $10 million of other people's money -- or even $1000 of your own -- you can blindly buy a random selection of "stocks" and probably do no worse than the stock market as a whole.

With "coins" should an IRA allow Conder Tokens or Nuremberg Jetons or Tetradrachms of Alexander the Great? Or only "American" coins? Is a Massachusetts Pine Tree Shilling an "American coin"? How about PATTERNS of American coins? Commemoratives or Circs? What about paper money, even Federal paper? Should that be allowed, with grading even wilder and the markets even thinner?

No, all in all, coins are not "investments." It has nothing to do with whether or not they appreaciate in value. Coins meet none of the basic requirements of a mature market.

So, IRAs only allowed gold coins as gold coins and only certain AMERICAN gold coins: modern issue Gold American Eagles. I do not think you could put Saints and Early Libs in an IRA.

But that is all in the past now. The reason why is that regulating it was more trouble than it was worth. Not many peoiple invested in coins via their IRA or built their IRA with coins.

 

You must be young, Rick. I would bet that 90% of the people who buy gold coins in America do so because they know (KNOW for a fact as solid as the Earth they stand on) that our government and our society are collapsing right before our very eyes. It is a slow process, but inevitable.

Take inflation -- which is the inverse of the "price" of gold -- and take that good, Republican, moderated, controlled, Alan Greenspanned, growth inflation that keeps up with our wonderfully expanding productive economy. Compound 3% over 20 years. That is what happens under the Republicans: your government paper money has lost about half of its value in 20 years. Wait til the Democrats come back...

(Granted that computers increase productivity. Granted that the dollar is not collapsing as fast as other currencies. Etc., etc., but look at the price of a loaf of bread.)

They also buy silver. Silver has been called "the poor man's gold." [** see below] Silver is volatile because there is very little primary silver production. It mostly comes as a by-product of copper refining. This is the electric age and you cannot ring a door bell with glass. We need copper. As a result, we get silver, more than we need. We do need it, however. That 2% silver solder holds a lot of copper together. Photography does not use much any more -- and that hit the silver market -- but I liked the good news that Curad puts silver in its bandages. All in all, sooner or later, someone draws down the reserves by taking delivery on silver bullion and the price rises. Also, there is some speculation. As gold goes, so goes silver.

** (Most Americans are poor. We think we are "middle class" because we all watch the same football games on cable tv when not waxing the SUV, but really, to be middle class you need to earn $100,000 per year for one adult or about $150,000 per year for one household. Everyone else below that is in the "working poor" down to the chronically unemployed. I recently had a newspaper reporter tell an online group that professional journalist outdo "web loggers" because pros get a whopping $60,000 per year: working poor.)

 

Well, I'm 31... I think that falls into the range of young to some and old to some others =) I have a 15 year old daughter, and she thinks I'm old - she tells me so everyday, it seems.

I hear, and agree with most of what you said - except the end there, about the working poor. Other than that, I have, since this thread was listed, read three books about collecting, and it seems, when it came to gold all three sources agreed with what you said.

I love buying gold coins - but not because I think it is a safe place for my finances in the event of economic disaster, but because I love the aesthetics of the coin, itself. Sure, it helps that there is a certain value associated with it, because of it's basic nature. I think I buy them because of the economic importance in history, to some degree, as well.

I have about 25 gold coins, that probably add up to somewhere around 5 ounces of gold - only two of which have collector value other than bullion content or bullion + 3% (etc.).

So what you are saying is that even when they allowed it, it was more of a means to invest in the gold market, anyway... right?

 

Well, of course society is collapsing and it's been doing it for more than 3,000 years. With any luck it will continue to do so for another three thousand years.

In the mean time one has a choice of doing what he can to be ready for the collapse AND to be ready for it not to collapse.

The key to the latter is education not only for the individual as an investment but to all people so they'll recognize their folly and strive to contain the damage they do.

 

There is no doubt about that. Silver is pretty. Yet, gold coins are undeniable. They surpass everything. Nothing comes close. It is not just the devices -- though that is important; there are ugly gold coins -- but the luster, the depth, the richness, it all just comes right out at you in a way that cannot be summed up (or put down) in the phrase "shiny rock." (As for ugly gold coins, even the ugly ones look better than their ugly silver cousins.)

Michael

 

I agree. One of my favorite reads was MERCHANT AND MONEYMEN about medieval commerce. It opens in the Dark Ages with a merchant in 700 AD preparing for a voyage to Constantinople. Good times, or bad times, it is more a matter of what you make of them than a matter how lucky you were born into this century or that.

Civilizations (plural) came and went, but now, the entire globe is one civilization. The Greeks colonized their world from the Black Sea to Spain, from what is now Marseille to what is now Benghazi. Alexander's generals ruled in what is now Afghanistan. The Romans also colonized Britain, Spain, France, and Romania (of course) and other places. In both cases, people left overcrowded situations and found new lands, away from the troubles of the homeland. Then there was America. Now where do we go? How do you get away from a global society in decline?

I found a book called AGAINST THE GRAIN it is about how the agricultural revolution could be the death of us all. I read these same ideas in two science fiction books by L. Neil Smith. Agriculture depends on slavery, metes out starches that you cannot build brain cells from, assigns boring repetitive work, and so on. Hunter-gatherers get plenty of protein and have interesting problems to solve and everyone has weapons that keep leaders in line.

I don't see the world going over to a global society of free ranging hunters. It is, however, an option for the individual. The problem is that everything I identify with civilzation -- writing, numbers, astronomy, ceramic dishes -- came from agricultural societies. I don't know how to reconcile the two points of view.

In the mean time, I hunt for work and I hunt for coins.

 

I agree with you, GD... I really do.