The Miles Franklin Show-Maurice Jackson interviews Andy Schectman about Numismatics.
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Maurice: Welcome to the Miles Franklin Show, I’m your host Maurice Jackson and joining us for conversation is Andy Schectman the President of Miles Franklin Precious Metals Investments.
Mr. Schectman welcome to the show sir.
Andy: Thank you Maurice always great to be here with you, appreciate it.
Maurice: Andy before the show you and I were having a discussion regarding the pricing of numismatic coins, and the value proposition if they present right now. Before we delve into the topic, for first time listeners can you please share what are numismatic coins?
Andy: That’s a great question Maurice because I think there’s a lot of confusion. The term numismatic to me, I mean, first and foremost means value in and above the melt content of the coin itself. For me, it really would be coins minted prior to 1933, in the US.
I would stay away from anything that’s brand new, modern, minted, certified that some people claim to be numismatic when in reality they really aren’t. Numismatics to me would be coins minted in the US prior to 1933 that were once gold, or silver legal tender.
Maurice: Now, traditionally numismatic coins carry a significant premium to bullion coins. But, going back to our previous conversation regarding anomalies and distortions, that’s not the case is it?
Andy: No, it’s actually … It’s really not the case and it’s very unusual Maurice. I haven’t seen this type of pricing ever in 29 years of owning Miles Franklin. In fact, this is without question the lowest they have ever, ever, ever been priced as far as I’ve seen since we’ve been in business since 1989.
If we can go back to the ’90s, and all the way up until about 2006. With gold priced, let’s say, between $300 and $500, let’s just picking number call it four hundred. It used to be a gold eagle would cost you 5% over $400, so that’s $20. So, a gold eagle would cost you $420.
Typically, let’s use a Mint State 61 or 62 grade $20 gold piece, a very common certified, uncirculated $20 gold piece that really was what we would focus on back then. That may have traded at a 10% premium, and that was a pretty fair assessment. I think in terms of what they were valued at throughout the whole decade of the ’90s, and into half way through the 2000s. Maybe 10% above a gold eagle for an uncirculated hundred year old $20 gold piece. That offer had benefits such as; safety from confiscation, better upside potential, no dealer reporting, et cetera.
So, when you factor in another 10% call it 35 to $40, 9-1/2 out of 10 people who would buy gold before 2005 or ’06, almost all of them bought numismatic coins for a very small upcharge in premium about $40 an ounce. You would get a coin that would have benefits far exceeding those that you’d receive from gold bullion.
Well, around 2007, right before President Obama … The end of ’07, before President Obama took office once he had already been decided that he was going to take office. The perceived threat Maurice of confiscation became so rampant, so strong that those same coins the Mint State 61 or 62, by now gold’s up to a thousand dollars by the way; call it late 2007/2008, almost a thousand bucks.
Premiums on those coins, which were traditionally 10% above a gold eagle were now trading at 60/70% above gold spot. These were numbers that had never been seen before. When we talk about anomalies it was the greatest all anomalies, monstrous, monstrous premiums because the perceived threat of confiscation became so rampant that people were trying to flee gold bullion and buy numismatics.
Well, when that happened it became very evident to me that my clients who had lots, and lots of those coins needed to get out immediately and get into bullion. Because the further away you get from longterm established numbers, averages, trends, the greater the magnetic-ism that pulls you back to the mean.
So, with a thousand dollar gold price and $1,600, $1,700 Mint State 61 or 62 grade $20 gold pieces, I do that as an opportunity to increase gold. I would call people up like yourself and say, “Hey, you know Maurice I sold you a hundred of those MS-62s over the last few years. Why don’t you let me fly out and meet you, shake your hand, and deliver you 165 gold eagles?”
Everybody I spoke to for almost two and a half years from late 2007 ’til mid-2009, I flew all around America becoming Diamond Elite on Delta convincing people to trade these coins into gold bullion; without question was the best call I’ve ever made in 29 years. Because one thing that I’ve seen over, and over, and over, and over again throughout all of history as it pertains to market action is a market that starts out at fair value, gains traction, moves to the blow-off phase through overvaluation, and then when it corrects; corrects back through fair value to undervaluation.
In fact, levels that really nobody wants to be a part of. If you look at some of the most successful investors Maurice they’re always catching the falling knife. They’re always buying items or assets on sale, and that’s exactly what this is right now.
We’re seeing coins that for the last 29 years I’ve never seen anywhere near these levels, as it relates to gold or gold spot. So, I guess if I were gonna make just a blanket statement, the bottom line here as it pertains to anomalies and valuation is that the $20 gold pieces, the $10 gold pieces, the pre-1933 numismatic gold coins are without question the best value I have ever seen since 1989. I’ve never seen anything even close to it.
Maurice: That’s one of the unique virtues of being a client of Miles Franklin Precious Metals Investments is for receiving phone calls such as those that you’ve made to the clients. I’m sure they’re most appreciative, so it was a win, win proposition for all involved?
Andy: Yeah. So, we weren’t purchasing those numismatic coins that we were buying back from them for our own sales. In fact, there were three or four very large auction galleries that were bidding abnormally high premiums for these coins, and I viewed them as dumb as a mud wall Maurice.
I did not see the logic behind paying $600, $700 premiums over a thousand dollar gold spot price for a Mint State 61 $20 gold piece, that a year earlier had been trading at a $40, or $50 premium to the same gold spot price. So, the lesson to be learned here is that whenever we get so far away from historical averages there is an opportunity, if you have the courage to take advantage of it.
I guess, I would say that the opportunity is the exact same as it was in 1989, only in reverse … Excuse me, 2008, only in reverse. Pardon me. That being, premiums on these coins are non-existent. In most cases, you’re able to buy numismatic gold coins right now Maurice for less than gold eagles.
Some cases are more, some are the same price depending upon the grade you buy. But, the bottom line is that you are within the same ball park, within a few dollars on either side of American gold eagle to buy a uncirculated $20 gold piece. Those are statements, that is a statement that I’ve never made before. When I look at opportunities they always revolve around dislocations, or anomalies; in this market price anomalies, or supply anomalies. Typically, they’re not very long-lasting.
I can tell you that the reason people don’t buy numismatics or told not to is because the premiums are too high, the costs are too high. If I had my drothers I would own nothing but numismatics if the price was right, they are amazing coins. They’re pieces of a American history, they’re hundred plus years old, they’re all inspiring.
Whenever I show someone a coin from 1895, it was a $20 gold piece in someone’s pocket. A hundred plus years ago the response is universal, it’s one of amazement. So, I think that there is something to be said for the wow factor as it pertains to Precious Metals. After all, many people envisioned trading or selling those items down the road to take advantage of an opportunity or an emergency perhaps.
So, having ideas that are universally sought after, appreciated, and demanded obviously as it pertains to your liquidity and your flexibility behooves you. In my opinion, having a $20 gold piece certified, mind you, by PCGS or NGC third party grading companies that do nothing other than standardize the market, and level the playing field, and create a non-subjective form of liquidity, you have something that’s truly historic. Truly a piece of American history but has a tremendous amount of value and a tremendous amount of liquidity.
These coins are not rare of esoteric as it pertains to liquidity, they’re very common in this industry, but not very common as it pertains to modern minted gold coins. They’re scarce, they’re rare, they can’t be reproduced, they’re fantastic. If you can buy them at the right price like you can right now Maurice, it’s really the most compelling thing I’ve had to say in a long time to people. Because these exact same coins were just far too expensive the last decade, and now they are at the same price or less than gold eagles. There’s no reason to not look very strongly at them if indeed your listeners are considering buying gold.
Maurice:Andy as always thank you for your valuable insights. It’s been a real pleasure, and we’re wishing you all the best sir.
Andy: Thank you Maurice. To all your listeners a very Happy Thanksgiving, and a happy, healthy, prosperous 2018, coming up on the horizon. It’s always a pleasure to be with you, and look forward to talking with you again next week.
Maurice: Last but not least, please visit our website at www.milesfranklin.com, for more information regarding today’s discussion, and for all the Precious Metals Investment needs. For questions or comments please call (800) 822-8080 or email: Maurice@milesfranklin.com.
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