A sudden avalanche of folks have been asking about this pitch again, so I thought I’d re-share and update my thoughts on something I wrote in the Friday File for the Irregulars back in October of 2013 … so yes, this is getting a little old. Much of this is from that original note, or from my update back in January of 2014, though I’ve gone through and updated my thoughts (and some of the numbers) a little bit.
From my quick glance, the core of the spiel from the Stansberry folks hasn’t changed much for this “Secret Currency” since then, other than to call it the “#1 Cryptocurrency” now that that term has entered the popular lexicon (and indeed, the ad is not dramatically different than it was when I first covered similar ads of theirs five or six years ago).
The one thing that’s particularly different in the last year or two is that they use the curiosity about Bitcoin to catch your attention —
The ad back in 2013 started out as a “warning” about Bitcoin:
“Urgent Message for U.S. Investors:
“Do NOT buy Bitcoin until you watch this public message
“This is the true story of alternative currencies in America — the one you won’t hear anywhere else. The story only wealthy families know. Please take five minutes to watch this message and avoid making a very costly Bitcoin mistake.”
And then went on to compare Bitcoin to a host of past internet failures or value-destroyers like Webvan and Pets.com and Groupon, and then makes the argument that the “secret currency” does the same things Bitcoin does (provide some privacy, get away from the US dollar, etc.).
Which is sort of true — I have some experience with both this “secret currency” and with Bitcoin, I tinkered with Bitcoin myself for a to see how it worked and whether it might be a viable alternative to using credit cards, and I’m not all that impressed with how useful it might become at the moment… though I still have maybe half a bit coin sitting in a “wallet” somewhere.
This is how they introduce the ad now:
“America’s #1 Secret Cryptocurrency:
“This is the true story of alternative currencies in America — the one you won’t hear anywhere else. The story wealthy families know — and which could climb 300%+ over the next few years.
“Don’t buy Bitcoin, Litecoin, Euros, Swiss francs, Chinese Yuan, Gold, or Silver until you take 5 minutes to watch this message.”
What follows was published for the Irregulars as a little closing bonus in a Friday File about a year and a half ago, when Sjuggerud was pitching the “secret currency.” He’s still pitching the same thing, so the basic spiel is similar now.
[excerpted from Friday File, 10/11/2013]
I’ll close with a look at a teaser that many of you have asked about this week — it’s circulating pretty heavily these days, from Steve Sjuggerud, and similar teasers have tended to come up, in my experience, whenever the market is in a state of high uncertainty. That’s certainly the case today.
Sjuggerud has been pitching something similar to this for many years, though not so much lately until the last month or so — and a similar pitch has come up twice now, both in the ads that were signed by Steve’s brother that I covered last month (teasing, among other things, investments with exposure to the Australian dollar and the “perfect hedge” of buying a house with a mortgage) and, more recently, in a new wave of ads for this “Like Gold … Only Better” investment.
Sjuggerud’s brother called this “Rich Gold” and described it this way:
“It’s a secret many rich people are taking advantage of, but it’s basically ignored by the middle class.
“You see, most people think that all gold bullion is the same.
“But the truth is, there are two very different types of gold bullion.
“Regular bullion essentially just follows the price of gold. When gold goes up 10%, regular bullion goes up 10%. When the price of gold goes up 20%, regular bullion goes up 20%.
“But there’s a second type of gold (my contact called it ‘Rich Bullion’) that follows a very different pattern.
“‘Rich’ bullion has a tendency to absolutely skyrocket in value, many times higher than ordinary bullion, in times of financial distress.
“From 1970 to 1972, the U.S. government’s debt increased by about $50 billion (source: U.S. Treasury Dept.). And the price of gold during that period went up 80%.
“But from 1972 to 1974, right after these increases, ‘Rich’ gold bullion shot up an incredible 348%….
[more examples, bla bla bla]
“… this type of gold could not only protect your money… It could make you 500% or more over the next few years.
“Keep in mind: These two types of gold bullion look very similar. Almost identical – except for one very important identifying difference.
“And this difference has made ‘Rich’ bullion a prized asset among a lot of wealthy investors throughout history.”
And the more recent ad that’s running this week has a more inflammatory headline:
“Outlawed for 41 years… Now LEGAL Again
“This Unique Gold Investment Launched the Largest Family Fortune the World has Ever Seen…
“And Could Return 665% in the Next few Years”
Sound familiar? Here’s a bit more:
“Without giving away the secret just yet, I can tell you the secret currency is — as you might suspect — a form of gold.
“But it’s not your typical gold investment. Not by a long shot…
“It has nothing to do with mining stocks, mutual funds, options, futures, or bullion.
“Instead, this is a kind of currency used for centuries by the richest families to profit on financial windfalls created by governments around the world….
“This investment is like gold, only better — with the potential for much higher returns….
“The last time the Salomon Brothers brokerage firm included the Secret Currency in its annual investment survey, this investment ranked No. 1 over the prior 20-year span, with an annual return of 17.3%. In other words, it was the single most profitable thing you could do with your money over the previous 20 years….
“I believe an investment in the Secret Currency today could potentially double your money in the next six months.
“A 5-times or 10-times return over the next few years wouldn’t be surprising. Remember: The last time the conditions were even close to this good (in 1987), investors made 665% profits. Of course, nothing in the investment world can be guaranteed, but we believe the Secret Currency is one of the best investments in the world right now, in terms of risks, safety, and potential rewards.
“I think it makes sense for every American to own at least a small stake, with a small percentage of your overall holdings.”
So what are they talking about? Well, it’s still … collectible gold coins. That’s distinguished from bullion gold coins, like the modern American Eagle coin, which are priced based on the gold value they contain plus a couple of percent for the convenience of having them in coin form — they’re not rare, and people don’t pay big premiums for them.
But some collectible coins are quite rare, and fortunes have been made (and kept) by gold coin enthusiasts throughout history, including the many families Sjuggerud’s ad name-drops to get your attention. These are the coins, generally the most widely held are pre-1933 US gold coins, that will always be worth at least what the bullion goes for (since they could be melted down) but are generally sold at steep premiums to the bullion price because of their scarcity and/or condition. Most of these coins didn’t spend time rattling around in pockets, so all the ones you see are likely to be in very good shape but the gradations in condition are critically important to their value to collectors — you’ll generally see the best of the coins given a “Mint State” number and encased in plastic with an authentication certificate from a coin grader (MS-70 is “perfect” and pretty much unheard of for gold coins of this age, but a MS-61 coin will often get a solid several-hundred-dollar premium per coin (over the melt value) — and a MS-65 US $20 gold coin from the 1920s or 30s, which will look pretty much perfect to a non-collector and which contains just under an ounce of gold, could easily be worth twice the melt value (or far more, if it’s a rare date).
Steve Sjuggerud has been recommending gold coins for about ten years, and I’ve written about those teasers for years as well, but this time around he isn’t terribly specific in the ads about exactly which coins he’s recommending — he has liked several different kinds of gold collectible coins in the past, to my knowledge they’ve all been pretty high-volume well-known US coins (meaning there’s a ready market for them, they’re not “liquid” like stocks or bullion are liquid, but they’re pretty easy to sell at decent prices).
Probably his most successful recommendation in this vein has been the graded (MS-64 or MS-65) pre-1933 US $20 St. Gaudens Double Eagle coin, which rode up dramatically with the price of gold over the past decade but has, like gold, come back down a bit. His argument is that gold collectibles will continue to hold value far better than the gold bullion that they contain if bullion prices stay flat or drop, and that they are likely to become substantially more valuable, at much higher premiums to melt value, if we have another currency crisis or, as the gold bugs like to say, a severe disruption like a gold confiscation plan from the government a’la FDR in 1933 (that’s not going to happen, by the way — there’s no need for a revaluation of gold like FDR spurred with his confiscation plan, because the currency is not backed by gold as it was then … we can revalue the currency every day by printing a few trillion more dollars, and we’re already doing that).
There are manias in the gold coin collecting world as there are in any other collectible, so sometimes these coins have been extraordinarily valuable — coin enthusiasts like to cite times when these Double Eagles in average condition were going for multiples of the gold price (I’ve heard $4,000 for the coins in 1989, when the gold value would have been less than a tenth that amount), so that’s the real value proposition: they can’t be worth less than bullion since you could always melt them down, but they can go up a lot faster than bullion if the collectors get excited.
But over the years some of Sjuggerud’s chatter about gold coins for his subscribers has gradually come out and become more “public” — so I’ll just let you check out his words from 2010 and decide for yourself. He has a free 2010 version of much the same recommendation up on his website here, with presumably a similar logic and plan to what he’s pitching now, and coincidentally the prices of both gold (around $1,300) and the MS-64 PCGS St. Gaudens (around $1,800), are relatively close to where they were then (gold’s at $1,200, the MS-64 PCGS St. Gaudens is about $1,550 — so you can see that the premium can certainly shrink over any given time period). Check it out and see if you like the logic of buying these kinds of coins.
Personally, I do hold some coins that have collectible value beyond their gold or silver content, but that’s been more or less an accident and I haven’t made myself an expert on this stuff and don’t plan to, so I don’t make big investments in collectibles — I’d urge you to make the study of such things a serious hobby if you plan to invest serious money into these kinds of assets, whether they’re classic cars or old musical instruments or Victorian bed pans or, yes, old or rare gold coins.
And back to the present — right now from Apmex or other big dealers it looks like the MS-64 St. Gaudens are offered for about $1,500 or so with gold at $1,200, so if you had bought in October 2013 and had to sell now you’d be looking at something like a $300 loss on the collectible coin versus a $100 loss on the bullion. Those numbers are not particularly accurate, either the prices I jotted down today or the ones I checked 18 months ago, but that’s the kind of leveraged action collectibles can sometimes provide when sentiment shifts about gold — the collectible coin market is obviously influenced by the bullion market, but it’s also influenced by supply and demand of specific coins, among other things, and is far smaller than the gold market with wider bid/ask spreads and a less consistent price from dealer to dealer.
I wouldn’t tell anyone to bet their portfolio on either gold coins or Bitcoin, but gold is embedded in human culture as a traditional store of value and has been for thousands of years, and it is shiny and physical, so that gives it the leg up over Bitcoin if you’re talking about a “hard asset” with a controlled or constrained supply (gold is constrained by the amount already produced and the mineable deposits found, historical gold coins by the amount actually minted, and Bitcoin by algorithm and controlled release over time). Bitcoin’s longer-term potential and the reason for most of the venture capital interest in the technology is not just the non-manipulatable supply that’s not controlled by governments (I wouldn’t be 100% sure about either of those things), but the possibility that it could radically revamp money transfer technology and make it faster and cheaper, undercutting bank and credit card networks.
So far, from what I can tell, Bitcoin is not particularly fast or cheap for any real world applications and it’s a terrible way to transfer money if it can fluctuate 5% in the time it takes to move from your bank account in dollars, into Bitcoin, to someone else’s bitcoin wallet, into their bank account in whatever their currency is … of course, if you just keep your money in Bitcoin then it’s notably faster but can still take many minutes to confirm a transfer, which rules it out as a means of purchasing goods even for those few merchants who are, either for ideological, experimental, or publicity-seeking purposes, accepting Bitcoin for the sale of actual goods.
But does that mean you should eschew Bitcoin for collectibles? Or buy collectible gold coins as a store of value? Your call. I’d rather depend on bullion as a store of value than on collectible coins or bitcoin, since the latter is so unproven and possibly ephemeral and the former requires more attention and expertise than I particularly want to give or build … but it does sure seem that collectible coins have sometimes been very lucrative investments, particularly when purchased for not much more than their melt value and at times of economic pessimism when they were unloved. I’m relieved that my ability to pay the mortgage next month does not depend on any of those three asset classes going up.
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