Do Not Sell Your Toys

It appears that “the market” (or perhaps only insiders) is/are doing a little profit-taking in the realm of gold, while other precious metals continue to look to this analyst as though there are unseen–sometimes conflicting–thumbs on the scales.

Silver closed at $18.49, Friday, which gave me nothing but mild satisfaction that I stopped buying at $13.00, not any irrational urge to turn loose of my hope of becoming stinking filthy rich for a minimum profit now of 50% delivered via a check for increasingly-valueless Federal Reserve Notes I don’t have any real winners to invest in immediately. Signature chuckle…Tiffany, print this out and if your dear old mother starts selling silver, haul me before a judge and hand it over as proof positive that I am no longer compos mentis and want you named as my keeper–with Andrew as back-up if YOU do anything as daft as turn loose of physical silver and gold. There. I admit it in advance, signed and said before a quarter of a million readers. Smile…all of you already know that nothing short of terminal senile dementia would induce Mummy to part with gold and silver, and probably not even that.

I keep a superb 1898 BU (Brilliant, Uncirculated) ten dollar Eagle on my desk and pick it up when I’m musing over what to write, luxuriating in the hefty richness in my hand and the way that gold turns into the cold, hard, implacable supreme judge of the value of things when it is not touched. Once in my hand the coin warms quickly to body temperature (96.8 degrees, in my case), as it quickens to dreams and power.

The BIG issue here is what are the sellers selling? If they are swapping in gold ETF’s or even mining stocks, okay, perhaps they know something I don’t and it is a harmless enough gaffe because what they are selling isn’t “real;” even if they don’t, anyone (picking up the Eagle again) who turns loose of physical gold for anything other than land or a functioning oil well really ought to consider eternal verities and the likelihood that those are really magic beans he is getting for his cow. It has never been a rule, but I, personally. distrust fiat currency printed in purple. I thought carefully about what I would hand that ten dollar gold piece across the table for, and the answer was “Nothing less than 30 very secluded acres I won’t pay more than half an ounce of gold each for.”

Needing a little extra inspiration I pulled out an 1802 tenth of an ounce Eagle in such magnificent shape the sprue point hasn’t been knocked off, and it smiled at me saucily and said “I may not be very big, but I’m still very powerful!” That beautiful little coin is 208 years old, and it was always for dreams and big purchases, never for the hoi polloi. It wasn’t carried around in pockets; in those days that was a year’s wages for house servants, a condition that may yet come to be again, hallelujah.

Yes, I ought to be ashamed of myself for taking such things out of their protective cases, but I’m not. They’re mine and I can handle them when I feel like it…which is part of what today’s article is about. Mind, this is my opinion, and probably not Gary’s or anyone else’s at Agora’s, but my feeling is that “numismatic” value is something we reserve these days for the small collection of Roman and Greek coins I started forty years ago and haven’t added to since 2005 because I think times are too hard to indulge in such things. Nobody enjoys “history held in the hand” more than I do, and in the past an extremely good head of Alexander the Great, die-struck by hand, was worth the $400 I paid for it and appreciated nicely. Unfortunately, I fear that we need to re-think our position on collectibles; I have never acquired postage stamps because they do not interest me and they are very, very fragile, and vintage comic books, autographed baseballs, Beanie Babies, and Barbie dolls are even sillier. Very small interest groups. You can pick up Hummels in large lots for $60/each easily, not that I would. Maudlin and mawkish.

The gospel according to Linda is that collecting coins for “numismatic” value is going to lead to some thumping big losses because if this plays out as I expect it to your oddities will be harder to sell and (which is far worse) what you will get for them is the scrap value of the gold.

Yes, I made my mistakes, too! The chances that my kids will see big profits in my modest, but choice, authenticated collection of Chinese jade is slight for at least 20 or 30 years. That’s okay, they can enjoy them for their beauty and rarity, too. I use a very large, magnificent circle of carved Han dynasty as a coaster under my wine glass! It reminds me that two thousand years ( plus or minus two centuries) are but as yesteryear–and protects good wood.

I’ve got a couple of real finds I think are museum quality…but I expect it is going to be a while before museums are buying again, donations being down, and all. As nearly as I can tell one of the carvings is somewhere between an early passport and a “hospitality” token; the four sides have what I suppose is “Treat the bearer right because you owe me!” in very early hieroglyphics–which I read, as you recall–what are clearly very early Chinese characters, Sumerian, and Greek. I picked it up for very little because I was in the right place at the right time and knew–or think I knew–a rare find when I saw one.

In the relatively short term–twenty or thirty years, perhaps?–a coin will either be .999 fine silver or 24K gold or it won’t, and nobody is going to care whether it is a Pine Tree shilling or a Mercury dime. Barbarians. What can we say?

Similarly, I cringe when I consider a “classy” and classic investment, Georgian silver, something discerning collectors have prized for a very long time. It would be an outrage in the sight of God and man to toss such things in the melting pot, but only those with money to pick up historical value at little more than Spot are buying. So…I used the 1777 hand-made punch ladle at Christmas and alternate hand-made sugar tongs on my tea sets. They aren’t really saleable easily as antiquities, and I’ve got more in them than the price of silver even now–and it would be barbarism to melt them even when silver hits $25. So, live with it and enjoy your beautiful things. So long as I don’t knock a two thousand year old hunk of jade off the table and break it using it won’t hurt it and I enjoy looking at it. We can say that in hard times people stick with what they are certain about.

So why did I buy the three Eagles? Because the fellow I got them from was sold a pup about “numismatic value.” He paid a hefty premium for age and condition and got in a bind. He intended to go (shudder) to one of the numerous “WE BUY SCRAP GOLD!!!” shops springing up where he would have gotten less than Spot. He won because I paid Spot, and I won because I paid spot but not mintage, historical value, or sales tax. He has a couple of full eagles he’ll turn loose of eventually, and I’ll be here with cash in my greedy little hands. Taking advantage of him? No such thing! I’m giving him more than he could get elsewhere. Bet wrong and you pay the price.

He hasn’t even learned his lesson. He still bleats helplessly, “They said they would always buy the coins back at what I paid for them!” Sure they will. Spot price of gold now exceeds what he paid. He’d have done better with boring Pandas, Krugerrands, or Maple Leaves. Buying dreams and rarities is always chancy.

Silvery peal of laughter…stick with what South’n ladies are taught as tots. We never sell our jewels, furs, fine automobiles, heirlooms, designer clothing of whatever vintage, or coin collections. Those things are not only armor against the world, but you will never get out of them what it would cost to replace them. Tighten your belt this month, because whatever you get will be gone next month and you will be no better off. You will still be hungry or short of cash, but a priceless asset will be gone forever. Solve the problem some other way.

Craig’s List is full of those who, having mortgaged their futures, are now eating the fat of the past. You can pick up fine china (I got a full set of beautiful Noritake, the good stuff, for $300), sterling flatware, bass boats, motor homes, livestock, and luxury vehicles for pennies on the dollar–IF you have managed your money so that you can take advantage of the mistakes and character flaws of others. I am still furious every time I recall some newlyweds a couple of years ago who sold me his mother’s large, mint condition set of a very prestigious sterling pattern for less than two thousand dollars (You know me! For less than Spot!) because they wanted a honeymoon, of all the stupid reasons. Do you suppose their hazy memories of sex and Mai-Tais in Honolulu begin to approach the value of one of the great luxuries of life and status symbols and a real asset in times of crisis? Of course not. I expect to see the day when I will trade what they threw away away for about fifty acres of land, and Gerald O’Hara, in Gone With The Wind had it right: “The land, Katie Scarlett, the land.” So long as “Reparations” don’t raise taxes to the point where no one can pay them, nothing else has the enduring value of land–except beautiful, beautiful, portable gold, silver, and good rubies and sapphires. Forget diamonds, the most common of precious stones; one of these days the IDC will lose control and they will be “worth” little more than Cubic Zirconia, certainly less than even indifferent emeralds. I grabbed ametrines when they were common; like Tanzanite, they no longer are. Look for what is rare and beautiful and priced right.

Even depending upon your reading of the future, this is a time of great opportunity. My bet is that first I should become as self-sufficient as possible, surrounding myself with superior men who are willing to be my barons with their own fiefdoms (we did decide, earlier, that I’m not really a megalomaniac) in return for the protection of what I have put together, and after that I should pick up extra classic tokens of wealth and privilege at vastly-reduced prices, just as happened in the Great Depression.  I’ll instruct my wonderful children to let you know how my money management turned out after I’m gone. Like anyone else, I’m sure there will be winners but that even my “losers” will be wondrous things of true intrinsic worth, beauty, and value.

How do you judge the long-term worth of a thousand year old cup carved out of horn with the chop of the master carver on the bottom? I stopped, went over to the enormous hand-made Chinese display case, and picked it up, filled it with wine, and am probably the first person to drink out of it in centuries. (The hand cut crystal glass is a better vessal in terms of drinking although the horn cup feels good in the hand.)  You either treasure such an object d’arte or you don’t.

I’ll leave you with a story I tell frequently which proves that life is very censorious, but don’t blame me because I didn’t do it. I just understand how the world works. I had run across to Ciudad Acuna on a shopping trip with a friend who prides himself on living less well than he could and dresses like a street person. We got hungry and I turned instinctively to the restaurant nearest at hand–the best in town–and the manager took one horrified look at Gene and began hustling him out. He took offense at 1960 polyester bell bottoms and an Aloha shirt so faded one wondered what it was, not surprisingly. So had I.  A quick, discrete rattle of my signature six inches of gold bracelets (If Gary changes the cropping on the photo he uses he can show you my favorites. Please do, Gary, because the gold is prettier than I am!), and the manager become quite obsequious instantly and showed us immediately to the seat of honor in front of his big plate glass window. Never mind that my friend was a sartorial disaster, the maitre d’ knew the value of having La Senora on view. I smiled complacently and graciously because it is beneath my dignity to condescend to sycophants and I was hungry. The joke is that La Senora may have had on about $15,000 in jewelry, but she was wearing slacks from Target and a twenty-buck top from Ross Dress for Less! She looked elegant, thank you. Furs, jewels, and assorted bling do distract the eye and the brain. Lunch was excellent. What made the difference is that all my life when I had a little extra or a windfall I put it into enduring value, not Liz Claiborne or the Sunday Ticket. Shudder. Imagine the ignominy of being thrown out of a restaurat in Mexico! That, alone, is enough to persuade sensible people of the importance of keeping up appearances. As I said, it is armor.

Figure out what has enduring value, sacrifice to accumulate it, and keep it. Obama would sneer at our income, which is far, far below his idea of a “middle class” quarter of a million/year. (Not having a mortgage of any sort or credit card bills helps, to say nothing of all those ranch and farm tax deductions.)  In particular if you see what you think are green shoots and I am certain is algae on the side of your fish tank, by all means give your investment capital to Byron King, Doug Casey, Bill Bonner, or Gary Gibson to manage for you.  I’m sure this is an excellent plan and would do it myself if I weren’t buying cattle, machinery, and physical gold and silver.

Spurt of laughter: does it get any more Contrarian than putting my judgement above theirs?! Well…we do the best we can with what we have in terms of assets, including intelligence, and what I do professionally is analyze. I know what I’m good at, which is recognizing luxury at K-Mart prices, not figuring out how well paper batteries will do on ‘change.  When you’re on a lottery ticket budget you have to be creative. I can’t settle for a couple of hundred percent increase; I have to do better than that. Over all I am quite certain that any of them could do splendidly for you…but I am responsible for my own choices and the outcome.

Either way, don’t throw your toys away lightly, and continue to treat gold and silver as the ultimate reality. Trade shale oil futures happily. Contemplate frozen methane. Just don’t sell physical gold or silver.

Linda Brady Traynham

January 11, 2010

The Daily Reckoning