Friday, June 17, 2011

Four Ways To Preserve Your Wealth And Make Some Profits

BY: Paul Buzby
Rare Coin Wholesalers
Numismatic Coins and Precious Metals
Will the Republican wins in the Mid Term elections cause an immediate economic boom or do we still have a rocky 2011 and maybe 2012?  Will Obama and the democrats move to the middle or keep governing from the left with anti-business policies?  Do you risk everything in the Stock Market or hedge your bet with tangible assets?
            In this article we will cover four very specific tangible assets: precious metals, common numismatic coins, rare numismatic coins and a unique investment program based on rare numismatic coins.  This is a basic how to guide backed up with 3rd party resources, educational tools and red flags of the industry.  Remember the old Ronald Reagan Motto “Trust but Verify”?  Verify everything you do in this industry.
            The first option is precious metals which include: gold, silver, platinum, bars, modern day coins (post 1932) or rounds.  You should not be paying more than 4% to 6% above spot price of the metal to buy and you should be able to sell for spot.  These prices should include shipping, handling and insurance. If you are being charged more or offered less, you are being gouged.  It happens a lot in this industry, verify everything.  Each of the precious metals has strengths and weaknesses.
            Gold is being pushed by fear and TV marketing.  Ten years ago the ratio between silver, gold and platinum was 17 oz. of silver to 1 oz. of gold and 3 oz. of gold to 1 oz. of platinum. That ratio had stayed pretty static for over 50 years.  Today, the ratio is 59 oz. silver to 1 oz. of gold and 1.2 oz. of gold to 1 oz. of platinum.  Fear of government spending and the heavy marketing by TV gold resellers has pushed the perceived value of gold way higher than silver or platinum.  The rule is to buy low and sell high. Gold is at an all time high. Will it go higher, probably, but at some point it will turn. When it does, gold will drop very fast.  If you have gold or thinking of buying gold, you need to follow the economy very closely. When there is perceived and noticeable improvement in the business sector GDP, business sector New Jobs and the government bailouts and spending has stopped, this is when gold will start dropping.  There is also a possibility the present government may confiscate gold.  The goal would be to destroy the U.S. dollar, by devaluing it, just like FDR did in 1934. Good for the U.S. Government and its debt, bad for everyone else in the world.  Just to give you the numbers, there has been 165,000 tons of gold pulled out of the ground since the beginning of civilization. 115,000 tons is in manufacturing and jewelry. 50,000 tons is in gold reserves (coin, bar or round).  The U.S. Government has 8,000 tones and U.S. private citizens have 20,000 tons.  56% of the worlds gold reserves reside in the U.S.  The closest country to us is Germany with 3,000 tons.
            Silver is undervalued and has a lot more potential to go up short term than gold. Google “JP Morgan Silver” to see several articles on market manipulation.  Silver was 75 oz. to 1 oz. of gold 2 years ago. Today it is 59 oz. of silver to 1 oz. of gold. Silver has outperformed gold for the last 2 years.  As long as you can handle the weight and volume it is a good investment.  A $100,000 investment in silver would weigh 370 lbs. and take up 20 shoe boxes.  Because Silver is mainly for manufacturing and there is a shortage, when the economy starts to get better, silver will stay pretty flat or drop slowly compared to gold. Technically silver can also be confiscated, practically it can’t.  There is a shortage of silver and it is needed for manufacturing.
            Platinum is also undervalued but for different reasons.  67% of the platinum and palladium that is mined goes into catalytic converters for the cars and oil industry emission clean up equipment (industrial sized catalytic converters).  When the economy collapsed, the auto and oil industry followed and the demand dropped drastically.  Platinum was going for $2,500 an oz. 3 years ago. Today it is at $1,700. When the economy starts to recover, including the car and oil industry, the demand for platinum and palladium will go through the roof driving the prices up.  Again, technically Platinum can also be confiscated, but for manufacturing needs, practically it can’t.
            If you are betting on a long term economic recovery, buy silver. If you think the economy will turn around quickly, buy platinum. If you do not want to deal with the patriot act, buy gold, silver or platinum American Eagles.  You can buy and sell as many of these coins as you want and it is a non-reportable item (no 1099, no SSN).  As for the Health Care Bill 1099 modification that makes every transaction over $600 reportable (all industries), democrats, republicans and independents are all against for different reasons.  It was only included so the CBO Office could say the Health Care Bill would pay for itself. This part of the bill does not go into effect until January 2012 if it is not repealed.  Follow ICTA (Industry Council for Tangible Assets) for updates.
            The second option is common numismatic coins.  There are millions of coins minted between 1792 and 1932 that have survived. Most are common, not rare.  These common numismatic coins have premiums ranging from 20% to 200% or more depending on spot, grade, supply and demand.  A year ago, the premiums on these coins were at an all time high. The gold resellers were heavily marketing these coins. Supply was down and demand was up.  Than the European debt problem comes to a head in January of 2010. After FDR confiscated gold in 1934. Europe wanted gold not U.S. dollars by 1936. Millions of common numismatic coins moved to Europe during this time.  When the premiums hit and all time high and Europe needed cash in early 2010, they dumped millions of these coins into the U.S. market.  The gold resellers moved away from marketing common numismatic coins to non-reportable European fractional gold, American Eagles and Buffalos. Supply was high and demand was down.  Premiums collapsed.  Premiums hit bottom around August 2010.  Supply is slowly being bought up.
            If you are betting on a long term economic recovery and think the gold resellers will start marketing these coins again, buy common numismatic coins.  The premiums are way down and large profits may be attained.  These coins are non-reportable, exempt from confiscation and fall under 1031 exchanges.
            The third option is rare numismatic coins.  Wealthy people learned a long time ago that you have three tangible assets: real estate, commodities and rarities.  Real Estate is tanking in most places, commodities are very volatile, but rarities have always been a good long term investment.  PCGS (Professional Coin Grading Service) one of the two large grading services for the coin industry show how rare coins have averaged 12% annually for the last 40 years.  This means they double in value every 6 years just sitting in a vault gathering dust.  It cost about 5% to 10% above the perceived value of a rare coin to buy.  The first year you are recovering what it cost you to get into the coin and making a little equity.  It is the second year where you start making good returns.  The trick is to buy the right rare coin, at the right price and have an exit strategy.  Working closely with experts, who you have vetted, can make a big difference.  There are many 3rd party resources to verify coins, prices, companies and owners.  Besides the investment potential there is also the knowledge of owning a piece of U.S. History.
            If you are looking for wealth preservation number one and make some good long term profits, buy rare numismatic coins.  Remember, rare coins are not tied to the ups and downs in the precious metals market.  Wealthy collectors push this market long term.  All these coins are non-reportable, exempt from confiscation and fall under 1031 exchanges.
            The last option is unique to Rare Coin Wholesalers and was designed for the pure investor.  RCW takes option three one step further and manages the client’s portfolio of coins.  While there are no guarantees, in an ideal situation ”turns” on money can be achieved up to three times per year, with profits of 10%-15% possible per turn.  The Investor receives 70% of the profit and RCW receives 30%.
            If you are looking for wealth preservation number one and want to maximize your profits both short term and long term, have RCW manage your portfolio of rare numismatic coins.
            Remember, the U.S. Economy will recover.  These four options may help you through these bad times and as you learn more, you will be able to money during the good times also.
            The following links will take you to past articles: Gold Confiscation Report, Red Flags Report and 3rd Party Resources Report.

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