The Rare Coin Enthusiast: January 2019

on 17 January 2019. Posted in News

Over 200 Years Of Combined Numismatic Experience At Your Disposal.

  January 2019 Issue


Let’s Keep the Success Rolling for 2019!

by Warren Mills

Welcome to the first Rare Coin Enthusiast of 2019.  I want to thank all of our friends that have trusted us over the years.  We’ve always done our best to earn that trust by supplying the best quality coins for the grade that we could find, our CAC results for our customers certainly proves that.  It also shows how many pretenders are out there reading labels and selling average to below average coins for the grade to their customers.  We are recommending that all of our customers send any coins that they’ve acquired from us for a few hundred bucks or more into CAC, while other dealers are falling all over themselves to discourage clients from sending past purchases into CAC.  The 20-40% success rate they have for their clients shows what pretenders they are.  Though we can say that we only average 80+% for our customers, that’s still a huge percentage more than the average.  That means that four out of five pieces we’ve sold over the years garner a CAC sticker!  Not bad, considering the average dealer’s percentage is 40%.

In our last issue, I brought up the example of how one of our long time customers came in with his collection and we recommended that he send them in for CAC.  That’s what every dealer should do for their customers if they want to get them the most money they can for their collection!  Yes, he did well but I must apologize for the calculations.  In my haste to write an Enthusiast, I went from memory, which at my age I should not do.  I stated that 67 of 72 coins CAC’d with one gold sticker.  Here are the real numbers, 68 of 72 CAC’d for a 94% success rate and three were gold stickered.  A nice mistake to make, however, I apologize for my error.  At 94%, I’m still a little disappointed.

I appreciate the many collectors and dealers that believe I am a decent grader.  I always try my best.  There is a dealer from Massachusetts that makes a point of telling anyone that will listen that I don’t know how to grade.  This dealer never met a coin that he couldn’t try to doctor.  I have worked for some of the biggest and best companies in the world of numismatics.  Whenever I was asked if I wanted to learn how to alter coins, I always said no!  I want to be a steward for the industry, not a problem.  To this dealer I say keep playing with your chemicals.  You’ve made thousands of dollars doing it, but to me I’d rather do it the old fashioned way and leave a coin in its original state.  How many of the coins you’ve buried customers with over the years actually CAC?  I guess that’s the old proof in the pudding.

Check auction results, you will see that CAC coins on average bring more money!  However, not all CAC coins are equal or even deserving of the sticker.  There are many CAC coins out there that don’t deserve to be CAC’d.  These inferior pieces end up in inventories until label readers need a coin to fill a want list that must be CAC’d.  Lately, I’ve been seeing coins that I’ve passed on in the past that were CAC’d and would have filled a want list.  The customer will show me the coin they purchased and I will be honest about it.  It doesn’t deserve the sticker and I’ve seen it in the market for months.  Bottom line, whether a coin is CAC’d  or not, the coin itself always carries the weight period.  Try to find a dealer to help you that knows the difference, you’ll be glad you did.  A customer came in today and showed me an 1810 $5 Gold piece in a PCGS holder with a CAC sticker.  Not only did I tell him I liked the coin, I also told him I tried to buy it at one time!  Remember, label readers are everywhere.
 

Thanks,
Warren


2018, What a Great Year!
by Warren Mills

I must thank all of our friends and family of customers for helping us achieve one of our best years ever! It is truly a blessing to have everyone working towards one common goal of providing the industry’s best service and coins possible. Please allow me to say a resounding Thank You! I know that the Lord is in charge and this could all change in 2019, but for now I’d like to thank Him and you for everything.

Thank You!
Warren

Partner and owner of Rare Coins of New Hampshire, Inc. since June, 1990 and a full time coin dealer since 1979.  Warren is a full member of the Professional Numismatists Guild and a life member of the American Numismatic Association.  He was selected by the Rosen Numismatic Advisory as one of the ten leading numismatists in the country for twelve consecutive years.  He was selected by PCGS and written up in their newsletter as handling and submitting some of the nicest coins they have ever seen.


REALLY?!!

by Joe Presti

Another day, another scam.  This time it purportedly involves a coin dealer from Utah, Gaylen Rust and Rust Rare Coins.  As an attorney, I am careful to say purportedly because until there is a conviction all parties are presumed innocent.
 
One week before Thanksgiving, the SEC published Litigation Release No. 24354 (LR) and also filed a civil suit, alleging that the defendants mentioned above defrauded investors of over $85 million between January 2017 and August 2018.  Some newspaper reports peg the fraud at $170 million over 10 years.
 
The SEC states that the defendants told investors they had access to an algorithm developed by their bank. This algorithm helped them realize annual returns of 20-25%, with some years experiencing much higher returns.  They also told investors that there was almost zero risk unless the price of silver went to zero, and that they also held millions of tons of silver stored at Brink’s.  In addition, they would send out statements to individual investors showing silver trades on their behalf with monthly increases in their physical silver balances. In reality there were never any silver trades taking place and they would use new investor money to pay past investors the ”big” returns.  Sounds like a classic Ponzi scheme.  
 
The supposed fraud took place over 18 months to as long as 10 years depending on which report you believe.  The total investors scammed were between 200-300, in 16 states.  Dividing $85,000,000 by 300 investors you would get over $280,000 per investor, more if you use the less conservative numbers.  Even if you are a millionaire, that is a lot of money to invest.  One would think that if an individual had that much money to invest, they would have professional help or be a sophisticated investor.  My assumption is that the perpetrators preyed upon those who felt most comfortable with them ala Bernie Madoff.  They were located in Utah and had deep roots in the Mormon community and time will only tell if most of the victims are fellow Mormons, much the same way most of Madoff’s victims were Jewish.
 
Why would a bank or any entity possessing an algorithm that provides annual returns of 20-25% not capitalize on the technology for themselves rather than give it to someone else to use?  This seems like a rather obvious question to ask.  What is so special about you Mister Fraudster, that a bank would give you their proprietary technology so that you could make money with it.  If I owned an algorithm that could provide returns of 20-25% with almost zero risk of loss, I would form my own fund or investor group.  I certainly would not give it to someone else to do what I could easily do.  Maybe the lucky ones who asked this question did not invest in the scam.
 
Finally, and I find this the most outlandish statement of all, is that they had millions of tons of silver stored at Brink’s.  Let’s assume space was not an issue and there was a building that could house that much silver, let’s focus on the claim of millions of tons.  Math Time!  Metals are traded on the metric system.  So, there are 12 troy oz. in a troy pound and 32,150 troy oz. in a metric ton.  Add some zeros and I get 32,150,000,000 oz of silver in one million troy tons.  Multiply that by $14 per oz. and you get over $450 billion.  These people claimed to have millions (plural) of tons of physical silver.  A quick Google check shows that worldwide silver production between 2005 and 2017 ranged between 20,000 and 25,000 tons per year with modern mining methods.  This claim is no better than, it’s true because it’s on the internet.  We all know how ridiculous a statement like that is, but this seems so obvious to me that I am surprised no one saw it for what it was, total lies.
 
Not only have these investors lost all or most of their money, but the “lucky” ones who realized “profits” are going to now have to deal with claw back rules.  When the Madoff Ponzi scheme was discovered, the SEC went after and recovered monies that Madoff paid to early investors from the proceeds of later investors. Everyone likes a good deal or to get in on something that will make money for them but in closing, I would like to repeat the mantra that I try to live by, if it’s too good to be true, it probably is.  That goes for buying coins, bullion, cars, homes or ANYTHING!
 
Link SEC lawsuit:
https://www.sec.gov/litigation/litreleases/2018/lr24354.htm


Nothing is Easy
by Dave Carleton

I wanted to keep my little missive light and not get into any negativity this month, but I did want to mention a situation that has been occurring on a more regular basis lately.  It’s a problem that we’re not quite sure how to address.  We offer bullion as a service to our customers and it’s not a profit center for us, as we only mark up gold by 1% and silver by 2%. It’s not a commissionable event for any of our salespeople.

We used to have our bullion drop-shipped from our supplier, in many cases to expedite the process and to save money on shipping.  We had to stop because some clients had complained that the bullion was all scratched up and not pristine.  We couldn’t defend ourselves because we never actually saw the material in question.  We would then have that client send the bullion back to us so we could replace it with fresh clean examples.   Then we would have to sell it back to our supplier for a discount because the coins are a mess.  By the way, our supplier claims that they would never send out such garbage, and I believe them.  

So here is the point I am trying to make.  We have clients that have acquired large quantities of gold and silver bullion from us and they’ve decided to store it at a depository for myriad reasons.  Then comes the time that they may want to liquidate, so they call us for a buy price, which is accurate at that present moment.  We can’t actually buy the bullion until we have it in hand, which sometimes takes more than a week for the material to reach us from the depository.  The problem is that in too many cases the material that is sent to us is that banged up crap I mentioned earlier.  Now we’ve got to call the owner of the bullion to tell them that we can’t get near the price we quoted, because of the inferior quality of the material we received from their depository, even though the spot price remains the same.  You can imagine how that sets with the customer.  

Apparently the bullion was placed in a non-allocated location at the depository and when it is ready to be shipped, they just grab what is handy and send it out.  I’m sure it costs more to have the material in an allocated depository, but at least you’re getting back your stuff and not someone else’s junk.  This may not sound like a big deal until you’re the client with a several thousand ounces of silver or gold and this happens to you.  Unfortunately, even though we did everything we could do in our client’s best interest, it still makes us look bad.
 
Thanks,
Dave

David Carleton, a New Hampshire native was introduced to coin collecting by his father and Grandfather in the 50’s. Gold bullion speculation dominated the 70’s culminating in 1980 when focus on Numismatics returned. He became a life member of the ANA , met Warren Mills  (his coin Guru) and they cofounded RCNH in 1990.


Questions From Our Mail Bag

By Warren Mills

Question:  “I recently sold some silver eagles from my IRA and I was told that the coins were spotted and received less money than I thought I should.  Since you help customers set up these retirement funds, I want to know what gives?” 

-D.D.

Answer:   Thanks D.D.

Here’s how to avoid that problem, set up an allocated account!  Many people don’t bother because it is a bit more expensive.  It may cost an extra $100 or so a year, but when you have to take a distribution it will pay you back big time!

Years ago, many dealers would sell bullion gold for a buck or two less per ounce, per coin.  In most instances, they would be selling inferior quality pieces.  Inferior quality pieces are below deliverable quality.  When they try to liquidate these pieces, they are paralyzed.  As an example, Canadian 1oz Maple Leafs will bring $6 over spot if they are deliverable quality.  If not, they will fetch $2 below spot, an $8 swing.

Now for silver, if you have to take a mandatory distribution, a spotted or impaired piece will net you 50¢ less than a fresh coin.  So for each box of eagles, you’ll lose $250!  These inferior coins are sold into the usual unallocated accounts.  These accounts are comingled with other accounts and then drawn from a pool at the time of distribution.  When the metals get more and more expensive, the demands for nice fresh coins become greater and the discount for impaired coins becomes larger.  To avoid this, make sure you get back exactly what you put into your account.  And the only way to do this is to set up and allocated account.  We scrutinize each and every piece to be sure they are superb!

I want to wish you all a happy, healthy and fulfilling New Year.  You are our life blood, again I thank you and wish you all many blessing.  Look for our report on the F.U.N. Show coming soon.

Thanks and keep those questions coming,

Warren

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