"IN COINS WE TRUST"
The ultimate form of true wealth beckons investors
By David Bradshaw, IFN
May 26, 2006

Tangible commodities and high quality collectible investments are on track to outperform intangible investments like stocks, bonds and CDs again in 2006, just like they have every year since 2001!

Gold and silver coins, the famous 'old world' currency are fast becoming the 'new world' currency because they offer the missing link in all paper currencies: a "benchmark" store of value.

A "benchmark" is defined as;
1) Something that serves as a standard by which others may be measured or judged.
2) An index used by market players as a yardstick to compare performance.
3) Originates from the chiseled horizontal marks by surveyors to bracket a leveling rod.

The U.S. dollar is slowly but steadily sliding into oblivion , taking with it the hopes and dreams of all Americans -- along with the value of their savings account or investments. It is no longer a benchmark of anything, except the public's faith in government (which is evaporating daily)!

In today's post-Greenspan era, Americans are facing a pile of unpaid debts. Now at the helm is a new Fed chief whose already been nicknamed "Helicopter Ben" based on admitting he'd print enough paper currency and distribute it from helicopters if he needed to keep the U.S. economy from sliding into a recession, deflation… or worse!

Decisive action must be taken now by individual investors to divest a portion of their "paper" assets into gold and silver assets -- which are fast becoming a new economic benchmark in the 21st century.

In Gold We Trust?!

Most Wall Street pundits still view gold as just a commodity which has been overbought due to the growing speculative fever. Gone from the psyche of most stock or even commodity traders is the historic respect for gold as the only real and true benchmark for all currencies.

Thankfully, The Wall Street Journal recently published an excellent commentary, "IN GOLD WE TRUST" by Mr. David Ranson and Ms. Russell of H. C. Wainwright & Co., which explains why gold prices are a much truer barometer of falling confidence and growing inflation than any other index out there. The key points Mr. Ranson and Ms. Russell bring to light are;

* It is gold that is a benchmark for the value of the dollar -- not the other way around
* The run on the dollar is largely being ignored by Washington and Wall Street
* The gold value of the dollar appears to be going into free fall, and the further it declines the more dire the consequences
* Gold's sharp rise represents an equally sharp decline in the confidence of investors -- large and small -- in the likelihood that Washington will pay back its mounting obligations in undepreciated money
* Gold is the barometer of public confidence in fiat money
* The dollar's collapse is nothing less than a body blow to capitalism

Mr. Ranson's research for the World Gold Council resulted in a report called, "GOLD AS A LEADING INDICATOR OF INFLATION" which concluded;

* Gold is an effective way to gauge and combat the ravages of inflation on a portfolio
* Gold consistently moves earlier than official measures of inflation - using the Consumer Price Index to formulate a sound strategy for protecting investments against inflation is bound to fail
* Given the evidence that the US and other major economies have entered an inflationary period, investors should consider an exposure to gold in their portfolios

Why "In COINS We Trust"?

While gold and silver bullion have made amazing gains since 2001, there's another tangible asset market niche that's also growing very nicely -- investment-grade gold and silver coins.

Traditionally the investment-grade coin market lags behind dramatic increases in the bullion market -- perhaps waiting to see if the bullion gains are sustainable -- thereby offering more stable price advances without as much volatility due to speculators.

For example since 2001, silver bullion has risen 175% (from $4.50/oz. to $12.50/oz.) -- 38% of that gain has come so far in 2006. Meanwhile, Mint-State-65 Morgan Silver dollars are also up 175% since 2001 (from $90 to $250) -- 65% of that gain has come so far in 2006. So, in addition to offering as good or better growth and liquidity as silver bullion, Morgan silver dollars offer less volatility, more privacy and more portability. Sounds like a winning combination to me.

Investment-grade U.S. gold coins offer a similar comparison. Since 2001, gold bullion has risen 145% (from $265/oz. to $650/oz.) -- 25% of that gain has come so far in 2006. Mint-State 65 Saint Gaudens $20 gold coins are up 110% (from $1,100 to $2,300) -- 21% of that gain has come so far in 2006.

Dr. Ray Lombra's 1998 study for Congress has proven that U.S. rare coins are a buy-and-hold investment which historically outperform bullion over the long-term. This aspect is helpful to those investors and collectors who want the financial protection precious metals offer without the day-to-day worry of wild price fluctuations driven by ETFs or speculators.

Reflecting back on the last major bull market in gold and silver of 1979-80, bullion prices rose an average of 721%, while investment-grade numismatics escalated 1222%. That equates to 60% more growth than bullion. Of course past performance is no guarantee of future performance, since the size and scope of the rare coin and bullion markets have grown dramatically in the last 25 years.

Coins Outperform Stocks 3-to-1 since '03

In January 2003, Kiplinger's magazine did a cover story, "If Not Stocks, What?" The reporter interviewed Craig Smith and discussed the alternatives to stocks including U.S. rare coin investing. The reporter's big problem with collectible coins was the "spread" between retail and wholesale prices, which can range from 14% to as much as 28%. Therefore, his conclusion, "I'll take my chances with stocks." Our response: Not Just Stocks, Gold!.

Let's see how well Kiplinger's advice panned out over the last 3 1/2 years. If you took Kiplinger's advice and put say $10,000 in Dow stocks back in January 2003 (with the DJIA at its low of 8,500) that equates to a 30% rise to today's DJIA at 11,100. So your $10,000 would have grown to $13,000, less brokerage fees, inflation, etc.

However, if you would have taken Mr. Smith's advice and instead bought $10,000 worth of U.S. rare coins, today that $10,000 would have grown 110% to $21,000! Of course we must deduct the $1,400 "spread" from the original purchase, leaving us with a net of $18,700 -- for an 87% net gain -- almost three times the return of stocks. My point is that most of Wall Street has not seen the golden opportunity available in investment-grade coins yet, but some are starting to catch on now.

Now let's say you bought the higher quality numismatic coins which have a 28% maximum spread, such as a set of U.S. Gold Commemoratives, minted between 1904-1926. The eleven-coin series in Mint-State 64 grade sold for $28,000 in Jan. 2000. Today the same set has grown in value to $54,225 -- almost doubled. After deducting the 28% spread from the original purchase price you have a net gain of 65% -- over 10% per year with no hassles.

Keep in mind that during the height of the last bull market in U.S. rare coins in 1989, this 11-coin set of U.S. Gold Commems sold for $150,000 in 1989-inflation-adjusted dollars (That's using the 66.4% official gov't dollar decline calculator). So, there's plenty of room for the 1904 Lewis & Clark $1 -- and the ten other masterpiece coins in the set to dramatically grow in value over the next decade -- regardless of whether gold prices are up... or down.

You'd have lost money over the last six years if you sunk $28,000 into the Dow back in Jan 2000, near the all time high of 11,700. My point is that even the rarest of coins at our highest spread have provided much better growth than stocks. During virtually any time period you compare over the last six years coins have outperformed equities -- without the volatility, worry and rollercoaster ride we've seen in stocks and recently in commodities.

For the long-term investor the spread is rarely a significant factor. Whether you pay 5-10% spread for a bullion coin or 14%+ for a numismatic coin becomes less important if you plan to hold on to the coins for at least 3 to 5 years, and even less yet for those holding 10-15+ years. Nevertheless, this should be discussed with your broker up front so there are no surprises later. Here's more common sense "Before you buy" advice from Craig Smith.

For nearly a quarter century Swiss America has advised clients to diversify a portion of their portfolio into both bullion coins and numismatic coins -- a strategy that many other hard money advocates agree is wise, such as Richard Russell, Marketwatch's Kevin Kerr and even the WSJ back in December 2004.

Conclusion: The dollar has no clothes, coins are true wealth

As more and more central banks, institutional investors and foreigners discover the U.S. dollar is like an emperor with no clothes, the gold rush will continue and the dollar's perceived value will continue to decline. Unless the U.S. can get it's house of debt in order soon, we will see four-digit gold prices in the near future.

As for the speculators who've had their way driving precious metal prices up sharply recently, I say thank you ... and good bye for now. Why should the raiders of the lost metal be the primary beneficiaries of a declining dollar? There are too many other good reasons for precious metal and rare coin prices to rise in the future besides greed.

Investment-grade coins are the benchmark asset of true wealth and offer investors the best of the best of all worlds -- the world of commodities bulls, the world of a collectible bulls, the world of stock and economic bulls, and the world of economic surprise and even "sky is falling" bears. Yes, everyday the world is growing to love gold a little more, to hate paper a little more, and to cherish historically significant U.S. gold and silver coins a lot!

The time has come for all prudent investors to diversify a portion of their money into hard assets like U.S. rare coins for the long-term, and then relax, even hope the prices fall a bit -- so those who've ignored gold's call to financial preparation can take action before the world officially establishes gold as the new global monetary benchmark.

Richard Russell's recently gave Dow Theory Letters readers some advice on how to turn junk paper into gold... "Take your junk paper dollars to a coin dealer, tell the dealer you want to swap your dollars for gold. Try it, I guarantee it works. But don't let all your friends in on this secret, because in time they'll all try it -- and drive the price of gold higher. I don't want them to do that -- at least, not until I'm finished buying all the gold I want."

Yes, the ultimate form of true wealth beckons wise investors again today, so please, don't wait to buy gold and silver... buy them now and wait! They will provide you with the insurance you need, the growth you seek, and the peace of mind you deserve.

Special Offers:
Craig Smith's book, DVD, magazine offer
Morgan Silver Dollar Research Report
COMMEMORATING AMERICAN HISTORY
In Search of the Best Investment on Earth

References:
Benchmarks
Mr. Ranson report to WGC
GOLD RUSH! Year 5, Day 152 -- latest market news digest


DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.

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