Thursday, July 23, 2009

Save 15% on Silver with this “nickel & dime” strategy

To my chagrin, it happened just as the cartoons suggested it would…

Our silver – all 71.6 ounces of it – arrived yesterday in a canvas bag.

Short of a crudely drawn dollar sign on the side of the bag, and maybe a few zebra-striped burglars, the cartoons had it spot on.

Without a moment’s hesitation, our research chief Andrew Packer pulled open the bag and dumped its contents out on his desk…

Quarters…piles and piles of old quarter dollars.

Mostly Washingtons, but a few Barbers and Standing Liberties. All from a time back when the money you traded actually had some intrinsic value.

Only worth about US$100 in face value, these quarters held about US$1,000 in silver at today’s spot prices. Talk about a reason to keep all your spare change.

Now the inevitable question…why are we doing this?

I mean; who pays a 1,000% mark-up over face value for five pounds of old, beat up loose change?

Somebody who’s getting the best deal on tangible silver that this market has to offer; that’s who.

Gold’s Scrappy Younger Brother

So far, our coin insider Nick Bruyer has kept Sovereign Society readers tapped into low-premium opportunities (usually in the neighborhood of 6%) and we’re gracious for that. Elsewhere it’s a different story…

Ebay’s the new spot for highway robbery – aside from Washington at least – and the legitimate premium on silver coins is 20% or more. Find a good condition Morgan dollar and you’re probably looking at a price tag around US$20.

To answer your next question: no. None of this is normal. In fact, it’s practically outrageous.

Supply is tight, but this is a case of exploding demand. And it’s a testament to how truly crazy today’s financial markets have become.

Apparently promise-based paper money doesn’t work with crooks and politicians in charge. At least not in the long run.

So in a very general sense, as we saw in yesterday’s A-Letter, investors have gradually shifted from seeking a return on their money to seeking a return of their money. Or more specifically; seeking the return of the purchasing power they were promised.

Knowing this – and seeing the market for gold coins light like up a Christmas tree last year – it was only a matter of time before silver fever started to spread.

Think about it from a practical standpoint…when was the last time you ever spent US$1,000 on groceries or gas? Have you ever tried to make change for a one ounce, thousand-dollar coin? No mean feat.

So if you’re seeking insurance against the unthinkable, it’s quite practical to have both silver and gold. Seeing as how silver’s just under US$14 an ounce, it also makes more sense to more people.

So the market for silver coins absolutely exploded. And the premiums I mention above are legitimately being charged almost everywhere today.

But there’s Never any Sense in Getting Ripped off

And with that simple fact in mind, we trudged off to find high value silver without getting ripped off by a middleman.

Surprisingly, it didn’t take our team all that long…

Our first thought was spare change; namely those old silver quarters. Granted, they’re not as pretty as Morgan dollars. And they’re not in mint condition…nor do they weigh a full ounce. But there are boatloads of old quarters, nickels and dimes out there. And whatever the condition on the surface, they’re 90% silver through and through.

No such luck there. The major retailers were still looking for 20% premiums.

So forget about the major retailers.

Andrew suggested one of his favorite wholesalers; APMEX. The place is like a candy shop for gold bugs and silver lovers.

After just a few minutes of window-shopping, we managed to find our cartoonish canvas bag of silver coins.

71.5 ounces of pure silver for US$1,041 before shipping. Trusty old back-of-the-napkin says that gives you a premium of under 6% – again, before shipping.

Score.

Instead of paying US$20 or more for every US$100 in silver, we paid US$6. An incredible difference, just for a bulk purchase.

The same seller offers smaller a wide variety of quantities and types, but this is likely one of your cheapest entries into the silver market. And by no means do you have to stop here…

A quick once-over spotted at least a dozen Standing Liberties and a handful of Barber Quarters in our batch. You can see a few in the photo above. “It’s hard to imagine, but quarters didn’t always have Washington’s face on them. That only started in 1932, on the 200th anniversary of his birthday.”

These coins are honestly in pretty rough condition for the most part, but there’s likely still some numismatic value there. And even with the bulk of your coins – the Washingtons – there are some that draw a numismatic premium based on the year and origin of their minting.

If you’re only in it for the silver, then you could play these things to your advantage.

There are plenty of other great reasons to be bullish on silver; especially bulk coins, but they were all eclipsed by my experience yesterday morning. CNBC playing in the background…Bernanke’s voice fading into the sound of four-hundred silver quarters clanging against each other on the desk. It was a new sound for some of us…and a very old one for others…

But for a few minutes, the news bulletins didn’t matter.

For a few minutes, the value of my savings didn’t depend on the value of broad, sweeping promises made thousands of miles away by guys I don’t know. For a few minutes, we all got to know a kind of value not understood in a lifetime. And it felt damn good.

Yours in Personal Sovereignty,

Matthew Collins, A-Letter Editor