Steve Sjuggerud over at Stansberry has a new ad out pitching a “secret currency,” designed to entice you to subscribe to his True Wealth newsletter (that’s one of Stansberry’s “entry level” letters, currently on sale for $49/yr)… and, as usual, we’ve got plenty of questions about it — so let’s see what answers we can find for you.
Here’s the headline from the ad:
“‘Secret’ Government-Issued Currency Could Help You Make Back Every Cent Lost In 2020 Collapse
“Forget about PPP, stimulus checks, or the CARES act… this little-known currency could return 500%, with very little risk”
Not sure which investors have lost money in the “2020 collapse,” for most people who’ve stayed invested it’s been a very good year — but, of course, many of us have lost big in other areas, losing jobs or seeing loved ones taken ill, and it’s certainly possible that there will be rough sledding ahead for either the market or the economy, even with preliminary good signs from a few leading vaccine makers.
So what is this “secret currency?” More from the pitch:
“… while tens of millions of Americans pray the government will issue yet another round of stimulus checks… only a tiny percentage of the country realizes there’s a second, ‘secret’ way to supplement your income.
“One that can rapidly grow your wealth over the coming years, with very little risk.”
Whatever could it be? Apparently it’s quite official, and it’s not some kind of newfangled cryptocurrency token…
“… it’s a little-known investment issued by the U.S. government, which has a history of growing your money in a safe, secure way – without touching stocks, bonds, or cryptocurrencies.”
And we hear about a few bigwigs who’ve been using this secret…
“The Morse family from New York made millions when their medical device company was bought by Pfizer. They are part-owners of the Boston Red Sox and they’ve hoarded as much as $19 million.
“The Brand family, who made their money brewing beer in Chicago, put a lot of their profits into this type of investment and it grew to a portfolio worth more than $10 million.
“Even actors, athletes, and singers are investing in this market. I found evidence suggesting that Matthew McConaughey, Joan Crawford, Kate Hudson, Paul McCartney, Wayne Gretzky, and Kareem Abdul-Jabbar are all reportedly using variations of it.”
That’s a motley bunch, but the Morse and Brand families are decent clues.
And apparently this “secret currency” did well earlier this year”
“In the first half of this year, while the Dow plunged 9.5%… this little-known investment handed investors returns of as much as 22%….
“When the U.S. government issues more and more handouts… this second, “secret” government issued investment often increases in value.”
And we’re told that the story started back in 1971, ‘behind closed doors’ at Camp David… so really, that’s all we need to know: this is yet another pitch about gold.
And if it’s a pitch about gold, and it’s also a “secret currency” that’s issued by the U.S. Government, then that means we’re talking about gold coins.
This is not exactly a leap of faith on my part, I must confess — Steve Sjuggerud has pitched “gold coins” as an investment idea many times in the past 20 years, most often touting specific varieties of older gold and silver coins that have some collectible value in addition to their melt value.
We get some confirmation of that when Sjuggerud posts a photo of an anonymized building and says…
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“And every day, thousands of people walk past these unobtrusive government buildings, never knowing that one of history’s greatest wealth-building strategies ever is hidden behind these windowless walls.”
Here’s the photo that Sjuggerud’s ad uses, without the words scrubbed off:
There are still several Mints around the US, but the one at West Point is best known for churning out American Eagle gold and silver coins and other non-circulating coins and commemoratives.
We’ll see if we can ID which coins he’s talking about, but let’s get a little more context from the ad first:
“There’s never been a better time to invest in this second U.S. Gov’t Currency than right now
“You see, it thrives in times of economic uncertainty.
“And, there’s only been a handful of times the buying opportunity was THIS attractive.”
Those previous times were when gold prices surged, too — in the early 1970s, then the late 1970s, then the late 1980s… and he could have thrown in 2011-2013, too, though the “secret currency” probably didn’t have quite the same crazy run during that more recent spike in the gold price.
And he makes the oft-heard inflation argument about the value of gold, which generally holds true in the long run (gold proctects purchasing power) but doesn’t always hold true in the short run (gold is like anything else, supply and demand pressures aren’t necessarily simple):
“… when central banks take drastic action like this… whether it’s firing up the printing presses or practically abolishing interest rates – it weakens its respective currency, and creates inflationary pressure.
“And, it literally makes our regular U.S. dollars worth less.
“Simply put, the Fed has set up a world where it takes MORE dollars to buy the same goods and services than it did in the past. And, if you’re holding a lot of assets valued in dollars… that’s a scary spot to be in.
“Of course, the government knows this.
“That’s why they’ve been issuing a little-known second type of currency for decades.
“Think about it… how else can you explain why the government continues, year after year, to create two totally different types of legal currency?
“And how else do you explain why our government remains, to this day, the largest owner of gold on the planet… owning more than the International Monetary Fund, the European Central Bank, the U.K., Germany, and Japan combined.”
The US government has been required by law by issue Silver Eagle and Gold Eagle coins “in quantities sufficient to meet public demand” for decades now, though that applies only to those two particular coin programs (which were started in the wake of government interest in selling off silver and gold stockpiles, and in buying precious metals from US mines). They mint lots of other coins as well these days, including lots of gold and silver coins (collectible versions, American Buffalo coins, various commemoratives, etc.), those are also all authorized by Congress and presumably they help to offset the operating costs of the Mint in some small way.
And Sjuggerud drops some other hints that sound very familiar:
“the last time this currency was included in one old brokerage firm’s annual investment survey… it ranked No. 1 over a 20-year span with a compound annual return of 17.3%!
“In other words, it was the single most profitable thing you could do with your money during that 20-year span. It beat stocks, bonds, gold, silver, artwork, diamonds, U.S. Treasury bills, real estate, and oil, according to an article in the Chicago Tribune.”
That’s most of what we get here, so I’m going to dip into the Gumshoe archives to excerpt a bit from an old Sjuggerud pitch from 2015 (also called “The Secret Currency”), since it gets into the ideas he has touted many times in the past…
“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%….
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 condition.
The report about these coins gaining 17.3% over 20 years are quite old now, that dates back to the days of the Salomon Brothers annual investment reports on asset classes — the last one that included “rare coins” was published in 1990, and this is the quote you’ll often see from a Chicago Tribune article around that time:
“Since the 1970s, Salomon has followed price movements in several categories of tangible and financial assets ranging from Chinese ceramics to stocks and bonds. The 1990 report, published last June, suggested that rare coins had ranked as the best investment of the past two decades, with a 17.3 percent compounded annual rate of return.”
And the caveat, and part of the reason Salomon stopped including rare coins:
“… the Salomon coin figures were based on the tracking of just 20 U.S. rarities in top condition categories. The Federal Trade Commission and others have accused some companies of using the Salomon numbers to suggest that all old coins had gone up by a similar amount.”
Most of these coins didn’t spend time rattling around in pockets, so all the ones you see for sale are likely to be in very good shape… but the gradations in condition are critically important — some years are much rarer than others, and you’ll generally also see the best of these 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 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 publicly recommending gold coins for about 15 years, and I’ve written about those teasers for years as well, but this time around he wasn’t terribly specific 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 has ridden up dramatically with the price of gold in the past (that doesn’t mean it has two eagles on it — in popular parlance, an Eagle is a $10 gold coin, a Double Eagle a $20 coin). And certainly high-grade St. Gaudens Double Eagle coins would have been in that Salomon “index” of rare coins, since they’re the most widely available and widely traded “rare” gold coin, but once you get into the details the date and the condition make a dramatic difference in the value to collectors.
Sjuggerud’s argument is that gold collectibles will continue to hold more value 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, but they can go up a lot faster than bullion if the collectors get excited.
How much? That’s anyone’s guess. Once you get past the bullion value, you’re talking about supply and demand from collectors, not really much different than the prices of Beanie Babies or baseball cards — though yes, there is that bedrock demand from the melt value of the coin, and part of the value of a coin is that the government imprimatur makes it more trustworthy, verifying the promise that this little token contains a certain amount of precious metal (in the case of the St. Gaudens Double Eagle, it weighs a bit over an ounce and is 90% gold, so one coin contains 0.96750 troy ounce of gold — so the melt value is ~97% of whatever the per-ounce gold price is today).
If you’d like to dabble in these coins, I’d suggest that you find a reliable gold dealer and be careful, and buy certified and slabbed coins. I’m no expert on this stuff, but I’m sure there are shysters and scam artists out there who would love to get their hooks in someone who doesn’t understand rare coin pricing. I have used APMEX in the past to buy and sell coins and find them to have reasonable prices and be trustworthy, though I have no business relationship with them and certainly can’t promise anything.
Right now it’s true that the premiums paid for St. Gaudens Double Eagles are relatively low, at least as a percentage of the gold price — you can typically find a MS 64 coin for about $2,200 these days if you’re not picky about the date, which is only about a 15-20% premium. It has sometimes gone much higher than that — but again, these are collectibles, so you take some risk in assuming that past periods of enthusiasm will emerge again. You can also sometimes find non-graded and non-slabbed St. Gaudens for only about $2,000, which is about the same price as an ordinary new bullion coin (the American Eagle), so that’s at least a more interesting investment than a modern coin, if that’s the kind of thing you’re into… but there’s nothing magic here, it’s just a gold coin with (almost) an ounce of gold and some variable amount of value as a scarcity or collectible.
The other likely candidates are the lower-denomination gold coins from that era, the Liberty Head and Indian Head $2.50, $5 and $10 coins (having roughly proportional amounts of gold each). None of them are collected with quite the same zeal as the St. Gauden’s $20 Double Eagles, as far as I can tell, probably partly because so many of those were minted and therefore there’s a pretty good availability, and partly because the Double Eagle is regarded as one of the most beautiful coins ever minted (subjective, obviously)… but there are many available dates and conditions, and they hold less gold so they’re cheaper, and it is kind of fun to hold a little piece of history in your hand.
And when it comes to silver, the most-touted collectible coin is probably the Morgan silver dollar, which was minted and heavily used for decades (1878-1921), followed by the Peace Dollar — you’ll find these in circulated and worn condition at a relatively small premium, and in much more expensive form for the higher-grade coins that are slabbed and certified at a particular MS condition. These are about 3/4 of an ounce of silver (0.7734 ounces, if you want to be precise), so their melt value should be close to that price, roughly $20 now that silver is near $25, but do note that it seems they’re pretty popular at the moment, so even “cull” coins that are severely worn and barely identifiable will probably cost you $25 each — those that are recognizable as Morgan or Peace dollars, with legible dates, would probably start at close to $30 a coin. Silver’s price is far more volatile than gold, so remember that these might well have been available at well under $20 a year ago, and at $60+ when silver hit its $45 peak in 2011 for about ten minutes.
Personally, I do hold some coins that have collectible value beyond their gold or silver content, but that’s been more or less an accident — I haven’t made myself an expert on this stuff and don’t plan to, so I don’t make big investments in collectibles. I’d urge you to make the study of such things a serious hobby if you plan to invest serious money into these kinds of assets, whether they’re classic cars or old musical instruments or Victorian bed pans or, yes, old or rare gold coins. The friction in trading these kinds of “assets” is high, so don’t go into it lightly — not only are they taxed as collectibles, but the spread between what a dealer will charge you and what they’ll pay you to buy back that coin is pretty large, so it’s easy to overpay… and to get maximum prices when selling you might have to sell on eBay or elsewhere, which is likely to be irritating for a lot of people (but can certainly also be a fun hobby, if that’s your thing).
Are they a “secret currency” that will surge 500% in value? Maybe. It has happened before… but we should probably remember that “past performance is no indication of future results” probably holds even more true in the collectibles market than it does in stock market investing — yes, the wealthy have always had a thing for gold coins, so that fascination probably isn’t going away, and the US$ will probably be actively depreciated for many more years to come, which augurs well for gold prices over time, but be careful about making assumptions about future gains in a particular collectible coin… and remember that the person who’s selling it to you is probably far more experienced with rare coins than you are.
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