“Newly Issued ‘Platinum Notes’ Set to Soar 1,173% — or More — by January 27th”

By Travis Johnson, Stock Gumshoe, November 19, 2009

How’s that for a promise, eh? 1,173% — not just a great return, but a remarkably specific prediction. Will it come true?

Well, let’s see if we can figure out what they’re talking about — the ad is for a special report that Sara Nunnally is pitching, published by the folks at Taipan, called “Gain 1,173% From South Africa’s Platinum Supply Squeeze.”

And the investment is something she’s calling “Platinum Notes” — of which she says there are several different flavors. Huh?

Let’s dig into the letter to get the big picture they’re drawing for us, and see if the clues lead your friendly neighborhood Gumshoe down the right path …

“Here’s the situation and why it could hand you a 1,173% return early next year…

“The U.S. Mint has suspended sales of its $100 platinum coins because of historic supply shortages.

“At the same time, demand for platinum is going through the roof.

“In fact, the U.S. Mint is so desperate for platinum, it’s offering to pay $1,322 for a $100 Platinum Eagle Coin.

“Think about that… If you had a few Platinum Eagle Coins in your pocket, you could sell them to Uncle Sam for a 13-fold return!

“Problem is, getting your hands on Platinum Eagle Coins is nearly impossible, which is why the U.S. Mint is so eager to buy them for 13 times face value.”

OK, so that’s very misleading. The mint has indeed suspended sales of the American Eagle platinum coins, both the proof and uncirculated and “bullion” versions, so that’s true, and they haven’t sold any 2009 coins yet, though they did recently announce that they’ll once again be offering the proof version of the platinum Eagle starting on (or about) December 3 (they won’t be selling the other versions this year).

What is misleading is the emphasis on the $100 face value on the coin — that might as well be a random number, it has no real meaning and I’m quite sure that a platinum American Eagle one ounce coin has never knowingly been sold for as little as $100. Just like a gold one ounce American Eagle has never been sold for $50, despite the fact that that’s the denomination stamped on the coin, or a silver Eagle for $1. You get the idea.

So any promised return that takes that $100 face value and says that the current price of an ounce of platinum (which is actually more like $1,450 at the moment) means you’re getting a 13-fold return is, well, ridiculous.

It’s worth noting, by the way, that the platinum coin program, and all of the mint-sold proof and uncirculated precious metal coinage that is sold directly by the Mint, is voluntary. The Mint is obligated by law to produce as many gold and silver coins as the market demands, but those are the bullion coins that are sold through distributors and dealers, not the collectible proof and “uncirculated” coins minted in West Point and sold directly to collectors in fancy little boxes, or the much more obscure platinum coins that aren’t really at the top of the government’s list of concerns.

So this year, for example, we’ve seen lots of teasers about how the Mint was unable to produce American Eagle coins in gold or silver — and while technically sort of true, they were unable to produce the proof and uncirculated coins; in actuality they’ve continued to produce plenty of the plain ol’ bullion coins — record numbers, in some cases — and sell them into the regular distribution channels, as the law requires, it’s just that demand for those bullion coins has been so great that they haven’t had the gold and silver “blanks” available for the collectible program.

The teaser continues, of course:

“While not a ‘collector’s item’ like Platinum Eagles Coins… some of these ‘Platinum Notes’ are government regulated, easy to buy and safe.

“Best of all, they offer the same astounding leverage as Platinum Eagle Coins.

“Remember, because of the supply/demand crisis, $100 Platinum Eagle Coins go for $1,322…

“‘Platinum Notes’ offer similar riches…

“In fact, people who claim the next issue of “Platinum Notes” could turn every $100 into as much as $1,173. In the following pages, I’ll tell you all about “Platinum Notes”…

“I’ll tell you how they work, and why they could make you very rich, very soon.

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“There is one catch…

“You’ll have to act fast. With the desperate situation we are in with platinum supplies, there’s no telling how long these newly issued “Platinum Notes” will be available.”

Of course you have to act fast! Otherwise you’re in danger of forgetting to order your special report, and going on about your life, never realizing that you could have sent Taipan two hundred bucks. It would have been awful.

Some more of her argument in favor of platinum investing …

“Of course, it’s too late to get in on the mega-boom in gold, silver or cobalt.

“But there is one commodity still on the launching pad… waiting to launch into the profit stratosphere: platinum.

“And there’s no telling how high prices will go. That’s because platinum is one of the rarest metals on Earth.

“Here’s an interesting fact:

“If you poured every single ounce of platinum that has ever been mined into an Olympic-sized swimming pool… it would just cover your ankles.

“Platinum is 16 times as rare as gold… and 100 times as scarce as silver.

“It’s so rare that a recent single seven-day miners’ strike… in a single country… decimated supplies worldwide.

“Bottom line: In a world in which supply/demand gaps can turn ordinary investors into millionaires…

“… platinum is in a class by itself.

“Thing is, most people never think of platinum as an investment opportunity. Which is why… if you move fast… you have a remarkable opportunity to get in on the ground floor of an explosive upswing in platinum prices.”

OK, so we can summarize their position: “platinum is awesome.” Got it? Now, why is it going to shoot up in short order? To summarize: Mining strikes.

South Africa has had terrible problems supplying electricity to its mines in recent years, and also some burgeoning labor disputes that have shut down operations, and, because South Africa is responsible for almost all of the world’s platinum production, those kinds of disruptions disproportionately hit the platinum market.

“Right now, at this moment, the South African platinum miners union is planning to strike against the two largest platinum miners in the country — combined they dig up four-fifths of all the platinum produced worldwide.

“Reuters reports of a sit-in by 240 workers that halted operations at a South African platinum mine that happens to be the world’s second largest platinum producer, and supplies a quarter of the world’s platinum.

“The company said it expects to lose 100,000 ounces in platinum output this year.

“Do you think platinum prices might skyrocket very soon?

“You’re darn right they could!

“Here’s the thing. The current situation is much worse than last year’s strike. South Africa is in its worst rec