Sjuggerud: “The Secret Currency”

By Travis Johnson, Stock Gumshoe, March 11, 2008

I’ve had dozens of readers send this one along, most with a long line of question marks. The teaser has been around for a while (a couple years, as far as I can tell), but it continues to spark interest — especially with the dollar at ridiculous lows, inflation fears bubbling, and gold near $1,000 an ounce (yeeks!)

The teaser has a few clues for us about what this “secret currency” is, but mostly the story is built on the aspiration to true robber-baron wealth that the gummint can’t get their mitts on — we hear the story of the Rothschilds, whose vast riches were built on Mayer Rothschild’s expertise with this “secret currency,” and we hear about a few other famously wealthy families, mostly around the turn of the last century, who built or protected their wealth using this “secret currency.”

So what the heck is it?

It’s related to gold, but “It has nothing to do with mining stocks, mutual funds, options, futures, or bullion.”

Man, that cuts the options down significantly.

One of the owners of the Boston Red Sox used it “to amass a fortune worth more than $15 million.”

It was banned on March 9th, 1933 by Roosevelt, a ban that held up for 41 years.

And there are several knockout examples provided of the returns possible through this investment … here are a couple:

  • “From 1972 to 1974, this investment rose 348%, according to an index that keeps track of its market as a whole. At the same time, stocks dropped 34% according to the S&P 500 Stock market index.
  • From 1976 to 1980, while the stock market plummeted 35% according to the S&P 500 Index, the investment I want to tell you about realized 1,195% profits.”

Sounds pretty good, eh? What do you want to bet that the current market malaise, and “so thick you could cut it with a knife” nervous tension of the investing public were the inspiration for the quick return of this teaser ad?

It is also noted in the ad that …

“In fact, the last time the Salomon Brothers brokerage firm included this vehicle in its annual investment survey … THE SECRET CURRENCY RANKED #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.”

So … this secret is apparently revealed, hopefully with much fanfare, in the special report they’d like to send you, entitled “The Secret Currency — How the World’s Wealthiest Families Make Money Even When Stocks, Bonds and Real Estate Lose Value.”

It’ll cost you $49. That’s the current sale price for the True Wealth newsletter, which I guess is normally $99. And I’m sure they’ll throw in a passel of special reports for you too.

The Gumshoe, however, is somewhat short of fanfare … and I left my pomp and circumstance in my other pants. So I’ll just have to come right out and tell you that this investment is …

Gold coins.

Yep … that’s right, no ticker symbol or anything, you can’t get these through Scottrade. Actual collectible gold coins.

When Sjuggerud talks about gold coins outperforming other indexes in that Salomon Brothers survery, that refers to surveys that they stopped doing a while ago because they weren’t accurately tracking the wide array of gold coins available for collectors and investors. More recent performance figures cited use the more modern index, referred to either as the CU 3000 or the PGCS 3000 index, and the performance numbers they cite certainly seem to be legit from my glance at those charts. More info about that is available from PGCS (the Professional Coin Grading Service … which is, coincidentally, owned by a public company, Collectors Universe).

There are at least dozens of fairly high profile shops and advisers online who would like to advise you about buying gold coins and even buy them and store them for you (though that gets rid of some of the fun of holding them in your greasy little paws and cackling with Scrooge McDuck glee), and there are plenty of actual marketplaces as well. Or you can do what plenty of people do and go to an actual coin store, where they still exist. You can even buy new ones directly from the US Government, if you’re leery of all the different varieties and the reputation of the shops and advisers (I certainly don’t know which ones are any good).

There are all kinds of gold coins — most people have heard of the US gold coins, which were still being minted as legal tender (the American Eagle coins). There are also at least a half dozen other countries that have recently minted gold coins, including South African Krugerrands, Canadian Maple Leafs, UK Sovereigns, etc. The benefit of the contemporary gold coins is that there are a lot of them, there is a standard market, and they all have a set gold content that is guaranteed by their government.

In recent memory, modern gold coins have generally traded at a small premium to the price of gold — so you can buy uncirculated gold coins from the US Mint directly, for example, for about $1050 for a one ounce coin, which is probably something less than a 10% premium to gold bullion, depending on the purity of the coin and the actual market price of gold (I didn’t look it up today). I expect the secondary market prices aren’t that much different.

So, should you? It really depends on you. It’s your money. I don’t own any gold coins, but I know a number of people who do, and they’re not all conspiracy theorists who are preparing for the apocalypse. I know Sjuggerud has recommended a variety of collectibles in his various newsletters, and he often mentions collecting things like classic guitars and other antiques, but for me that kind of investing takes far too much personal expertise … and besides, my closets are pretty small. That doesn’t mean that collecting unique items of any kind can’t be a good investing idea, as long as you’re not relying just on that for your retirement … and as long as you’re not talking about Beanie Babies.

It’s possible, maybe even likely, that Sjuggerud is talking about focusing on genuinely rare gold coins, which are priced dramatically higher (while modern gold coins trade at 5% or so above the price of the gold they contain, genuinely rare or ancient coins obviously trade much higher, even as they may still fluctuate with the price of gold to some degree). The really rare stuff would scare me because of my very limited knowledge of numismatics and the collecting marketplace, but the modern gold coins, which have pretty accessible markets and can even be bought directly from the government, make a certain degree of sense to me. Especially if you do happen to have a small part of your soul that believes “they” are going to come for you one day, and you’ll need a few gold coins in your pocket to make a run for it.

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So I certainly can see the logic of putting a portion of your portfolio into gold, and it’s true that gold coins had some remarkable returns over the years for a variety of reasons, but I can’t tell you whether it makes more sense to buy gold coins (remember, you’ll have to store them somewhere — and probably not in the change jar on your dresser) or to buy shares of the Gold exchange traded fund, or a bar of bullion, or shares of a mining company or any of the other variety of investments that trade in a circle around the price of the yellow stuff.

Is anyone out there in Gumshoe Land a coin collector or gold enthusiast? I’m sure you can find the mistakes I’ve made above, and I hope you can share some wisdom with us.

And I’ll keep looking out for collectible oil — anyone wanna keep a few barrels of West Texas Crude in their basement?

Happy investing, all.


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Dewey Cheetem & Howe
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Dewey Cheetem & Howe
March 11, 2008 10:23 am

Historically, gold’s ROI has been poor compared to stocks. Plus: you REALLY need to know EXACTLY what you’re doing AND have a significant chunk o’ cash to watch sit for years. It’s OK to sell grandpa’s gold watch right now, but I’d go no further than that. Keep up the good work, Gumshoe.

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Stan
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Stan
March 11, 2008 10:37 am

I can tell you he is talking about the St Gaudens from 1920-1933 in PCGS MS 63-65. I have owned several of these for the past 3-4 years buying them around $1050ea. They can fetch around $1600-$1700 on Ebay right now for a MS65 coin. He is touting them because he feels the rage still hasnt started as gold to the price of graded coins has the lowest premuim we have seen in a long time.

Ive made more money on his recommendation of buying swiss helvetia coins for $85 a peice a few years back and they sell on ebay for $180-$195 a peice. Now I like those returns and I do own 65 of these.

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Gravity Switch
Gravity Switch
March 11, 2008 12:27 pm

Thanks folks, always good to hear from people who actually make these investments. The St. Gaudens, for those who don’t know, are US gold coins minted in the first part of the 20th century (1907-1933 or so). They are “rare” because they’re no longer minted and old, but they are pretty widely available from pretty much all coin dealers online or off, and, as Stan noted, through ebay (I don’t knwo what’s special about the 1920-33 mintings, perhaps they’re rarer). St. Gaudens was the sculptor who designed the coin (or started to) at the behest of Teddy Roosevelt.

As you can see from Stan’s comment, these rare coins trade at a significant premium to their gold content, though that premium can fluctuate. The PGCS MS 63-65 he mentioned is a measure of the quality and condition of the coin, which is obviously much more significant if the coin has collectible value than if you’re just buying it to get that ounce (or nearly) of Gold.

That’s where the distinction between “bullion” coins that are just conveniently portable gold and “rare” coins that are collectible in their own right is made — maybe today’s American Eagle coins will be considered collectibles someday, but if you’re buying a 2007 American Eagle it’s currently just worth a touch more than an ounce of gold is worth on the market.

You might buy St. Gaudens because they’re rare, or beautiful, or historic, or because they’re made of gold, but you’d probably only buy American Eagles because you want convenient physical gold, unless you’re aiming for posterity and hoping that these (currently very abundant) coins, or particular mintings of them, become rare. At least, that’s how one (non coin collector) understands it.

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👍 7
gmail.com
gmail.com
March 11, 2008 5:00 pm

be careful buying this on Ebay…lots of scams

Elissa Stein
Guest
Elissa Stein
March 11, 2008 6:01 pm

For more information, try
http://www.golddealer.com. They sell gold, silver, and platinum. Good website, reliable company–you can buy coins with numismatic value, or just plain,certified
precious metals.

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Bret
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Bret
March 11, 2008 7:49 pm

I also have a soft spot for gold and took a shine to the various precious metals (ok I’ll stop now), and have bought successfully from two major online dealers:
http://www.apmex.com
http://www.bulliondirect.com

Both are good dealers, low cost and physical delivery available. One thing I really like about them is they show “buy” prices so you always know excatly what your item is worth.

Also to make a slight correction, if you buy a one oz gold coin, and its not pure (common since gold is VERY soft), the entire coin will consist of at least one oz of gold. For example, the Krugerrand is 22k gold, the rest basically copper. It weighs about 1.0909 troy oz or 33.9303g. Its not as pretty as a pure gold coin either, but much harder to dent or scratch, so makes for safer storage if you are concerned about scratches. Since its usually just worth its gold content (I got mine for $7 more than the gold price at the time – about $900), scratches aren’t much of a concern.

You can also get several other metals, and most do better than gold anyway, since these other metals have more industrial use than gold does. The industrial use means the metals usually get rarer over time, as the world stock of the metal depletes. Take a look at the price of silver and platinum as a percentage compared to gold and you will see. Then look at the “stocks” of the metal (stocks means the inventory, not shares of companies making it). You will notice that over the last several years, both have been falling fast, thus pushing prices higher. On top of that, you get the added benefit of protection against inflation (in general) since if the value of the commodity doesn’t change, but the dollar falls, it will take more dollars to buy the same commodity. That, and the perceived “safe haven” of having only so much gold but lots of dollars around, are what has been pushing gold so high. I personally think it will pause a bit at this level, then head off from $1k/oz to $2k/oz before long. However, in spite of owning some gold, most of my money in metals in in silver and platinum. Good luck if you decide to pursue this option – and yes, it it fun to cackle a little 😀

One last comment, buy yourself 10 or 100 oz of silver, then pick it up and hold it. It FEELS like money should. It’s heavy and it takes up some decent space. Its really quite surprising how heavy a small bar really is. Even a one oz coin feels like what you think a coin should feel like. Its hard to explain, but anyone here who has done it will probably agree.
Have fun!

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mary kay moore
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mary kay moore
March 11, 2008 11:06 pm

What about the 2008 Benji Olympic set or sets, there

are 3 different sets of 3.

I have the first set, pd.2,100. Think the 2nd sets

and 3rd be bought as well?

Thanx

Buford
Guest
March 12, 2008 7:40 am

Good work Gumshoe! I had my hunches on this one as well. I completely concur with your assessment. The Seattle Times has an article on this very topic in the business section today. I for one am betting silver will be a better way to play in the coin market.

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Robert
Member
March 12, 2008 1:53 pm

If you buy any of these coins, be SURE to get them sent to you and buy on a credit card, so you will have a recourse if you don’t get them. DO NOT have them stored for you. I got burned on silver bullion many years ago when the firm went under that was supposedly holding it for me, and the silver did not exist.

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Rollin Agin
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Rollin Agin
March 13, 2008 9:29 am

Great site Gumshoe.
I read a lot but always make time for your site.
Got a great laugh from your first commentator–needed it and set me off on the right foot for the day.
(From his name, not his comments, in case anyone missed it.—Dowe Cheatthem and How) (My apologies for the pedantry, but it was too funny to leave unshared.)(:-)