The Money Map folks are currently selling their subscription service by offering to throw in a free copy of Peter Schiff’s Crash Proof … the book is a couple years old now, and will be updated by a new version this Fall, but they tease a few of the investment ideas Schiff focuses on — and in that book he certainly made some good calls … particularly that gold would rise and stocks would fall, but he also gets credited with predicting the housing collapse, something that other folks saw coming by then, too.
There’s been plenty of chatter about Schiff in the last year or so as he has gotten more and more attention during and following the crash — and of course, if you listen to him talk he’ll tell you that the real crash hasn’t even happened yet, so perhaps he’ll be able to claim prescience for a few more years yet. Of course, if you listen to him talk you’ll also have to sit through a lot of “as I predicted” and “just like I thought would happen” sentences, but I guess you don’t build a successful brokerage without being good at selling yourself.
But really, it seems kind of odd to have the main teaser of your ad for a $50/year newsletter be the ideas from a two-year-old book that you can get for close to nothing used, or at the library.
Much easier than teasing your own ideas, I suppose.
Well, I’ve noted some of these before, but it is a lazy Friday morning … and people keep emailing them to me … so I thought I’d get what I can out in the open and clarify those Peter Schiff teases for coin investments, gold currencies, junk silver, and “safer than gold” money. Along with a few other teases, perhaps. Of course, as I said the book itself is probably at your local library, and it’s only $17 at Amazon, so you can certainly check it out without taking out a subscription to a financial newsletter.
So here they are, with the teases from the ad each followed by a quick explanation of what it really is:
“The “Gold Standard” Currency Set to Double Your Money in 18 Months! A forgotten British currency – fully backed by gold and the govt. – could soon double in value versus the dollar. In fact, this ultra-safe money will be the hottest currency of the next 18 months, bar none. Few outside of Britain’s Isle of Jersey know about it yet. Schiff shows you a simple way to invest in about 5 minutes, online!”
This is GoldMoney.com, an online gold transaction system that allows you to buy and sell shares of the gold that’s held in a vault. Schiff has endorsed these folks a few times before, it’s sometimes referred to as “electronic gold” or “e-gold.” Not so different from a gold pool account from a place like Kitco or the Perth Mint, but perhaps easier to trade. There are several other services much like this, but GoldMoney is the one Schiff has touted before, and it is run from servers in Jersey, using gold that is in vaults somewhere else secure (Switzerland? Don’t remember).
“Save Your Retirement with 3 Gold Coins: It’s the big secret of the gold-investing world. Certain gold coins are about to soar 3-5 times faster than gold, which is poised for another double in 2009! Schiff has identified the next three gold-coin bonanzas. They’re specific plays on Kruggerands, Maple Leafs… and a third coin set to pop between 1,500% and 3,000%! He also shows you an “idiot-proof” way to invest”
Schiff doesn’t recommend numismatic (collectible) coins, since that’s a more complex world for collectors and specialists. But that huge return could easily be just his expected return from bullion coins. The other one he specifically mentions, aside from those two and from the American Eagle (the most well-known gold bullion coin), is the Australian Nugget/Kangaroo (depending who you ask) — and I imagine he wouldn’t have any qualms about you buying the other major well-known gold bullion coin, either (that’s the Austrian Philarmonic). Those all tend to be priced pretty similarly, depending on availabilty where you live, and I suppose the reason he thinks that they’ll shoot up more in value than will the commodity gold price is that they’re easily portable and in short supply compared to the coming expected demand.
“Make 3,600% Gains with “Pure Junk”: Schiff reveals how you can turn sacks of silver “junk” into potential gains of 3,600%. It’s his favorite way to invest in precious metals, and you’re guaranteed not to hear about it in the Wall Street Journal!”
“Junk silver” is a pretty well-known way to buy silver on the cheap — or at least, it used to be, before the enthusiasm built and the prices jumped, and now it’s awfully tough to buy junk silver coins at a discount to their melt price.
If you’re interested in seeking out junk silver, the key number is 7.15. For every $10 of circulating coins minted before 1965 (dollars, half dollars, quarters and dimes are what you want — not nickels), you’ll be getting about 7.15 ounces of silver (that number apparently assumes some wear and tear on the coins in the intervening years). That’s because these coins were made of 90% silver (and the $1 and $2 bill were backed by silver, too, at the time) until the law changed in 1965. There were some 40% silver coins for a while after that, but that gets a bit more complicated and I haven’t bothered to get into it.
So if you ever see a dime or quarter in your pocket from 1964 or earlier, keep it — the silver is definitely worth a lot more than the face value.
These coins were almost all hoarded after the law changed, because people aren’t idiots, but you’ll still occasionally see one in your change — still, keeping an eye out for old quarters isn’t much of an investment strategy, so what people mean when they say they’re investing in junk silver is usually that they’re buying bags of old currency. Dealers routinely sell bags of old coins, usually with a $1,000 face value.
Since $1,000 would have silver content of about 715 ounces, you could do the math yourself to see if you’re getting a discount to the silver value — right now, I doubt you’ll see these deals at even particularly close to melt value, let alone a real discount, but you never know. 715 ounces at today’s price of $12.70 an ounce would be $9,080 (with, of course, the backstop that this is also legal currency and will never be worth less than $1,000 nominal dollars). I haven’t seen one of these bags for less than $10,000, which seems an absurd premium to pay for something that’s heavier than the comparable pure silver bar — that’s almost as much of a premium as you’ll pay for actual minted pure silver coins.
So you can always keep an eye out for this junk silver, but it’s a bit too popular by half now … but remember, any time you see someone with a 1964 quarter you can offer them two dollars for it and still come out ahead.
“Pocket ‘Safer than Gold’ Money… for Triple-Digit Gains: Most people think of gold as the ultimate in safety. But this ‘everyman’ currency play is even safer, considering where the dollar is headed. Here’s how to quickly double your money.”
I’m not sure exactly what this is — but I’ll hazard a guess. It sounds like he might be talking about a mutual fund that he often recommends, the Merk Hard Currency Fund (MERKX). This is a fund that essentially maintains foreign exchange positions for you, along with some gold — last time I checked it had about 14% each in Canadian and Australian dollars and in gold, with the rest in Euros, Norwegian Krone, and Swiss Francs. It’s a little expensive with a 1.3% annual expense ratio, but there aren’t a whole lot of currency funds out there — though you could also put together a pretty simple foreign currency portfolio using CurrencyShares ETFs (remember, these won’t make much money for you, if any — they have a bit of a yield when they hold short term sovereign debt, but really you’re just speculating on currency movements — or hedging, perhaps, if you’re overexposed to potential currency swings because of particular stocks that you might own).
So … those are the “gold” investments that we’re told about. And there are a few other teaser tidbits thrown in from Schiff’s book. Shall we look at a couple more?
“If you still own your home, you can turn $1,500 into $3,000 once per week – If you own a home, Schiff reveals a simple secret you can use “on the side” to turn $1,500 into $3,000… or even $15,000… every single week. And this one is guaranteed.”
This “every week” bit is a bit of an exaggeration, but essentially Schiff’s argument was that, although owning a house was probably a mistake, if you wanted to own a house and could afford to pay for it you could still get a mortgage, and play some arbitrage with it — using the cheap mortgage cash to buy foreign dividend-paying stocks (Schiff’s real raison d’etre — he doesn’t make much money buying gold for you, he makes it buying foreign stocks for you), and if the stock yields 8% and your mortgage is 6%, you’ve got a 2% free money bonus. Of course, this assumes that you don’t need the mortgage, and many people might consider this risky — you can make this math say just about whatever you want, and I’d be surprised if Schiff recommended anything along these lines today, but you never know. In the book he says that “by borrowing in currencies that are going to depreciate, and investing in currencies that are going to appreciate, you’re creating your own little hedge fund.”
As long as you’re right.
“Get Rich as the Housing Crunch Continues, with Schiff’s ‘Reverse Equity Hedge’: Instead of watching your liquidity dry and blow away on the breeze, use Schiff’s ‘Reverse Equity Hedge’ technique to stop the bleeding… and reverse the revenue stream BACK into YOUR savings account.”
I’m not entirely sure of this, but it sounds like the somewhat risky suggestion from Schiff that you borrow from the equity in your home and invest that money into foreign REITs — it read like a passing suggestion in the book, but it would have been frightening for someone who might have found themselves underwater on their mortgage a year or two later because of that big equity withdrawal, and might have invested in international REITs that matched the international REIT index, which is down more than 50% since Schiff’s book came out.
So … that’s a look at some of the Schiff teasers from his book that the Money Map Report folks are trying to use to convince us to subscribe — I assume that Schiff’s real estate-related advice would have changed somewhat in the last two years since the bubble has burst, and if I wanted to follow his current thoughts I’d probably wait for his new edition to come out in a few months (Crash Proof 2.0: How to Profit From the Economic Collapse, out in September)– but for those who are intrigued by the gold and silver ideas and came in knowing not much, hopefully it’s a little bit of a starting point — albeit one that’s also quite out of date, considering the book came out in January or February of 2007.
So … how about you? Any interest in high dividend foreign stocks? Fear the dollar? Love or hate gold or silver? Feel free to share your thoughts below …
Free Financial Dashboard with Great ToolsI check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.