HollisToo

A recent article in RadioWorld stated that aging baby boomers, now defined as ‘Alpha Boomers’, still have much buying power. The article stated that 1 in 5 of the aging baby boomers, AKA, ‘Alpha Boomers’, still make $100,000 or more in the average household.

It also stated that despite the normal mindset, baby boomers are more educated than the younger generation and that nearly 70% are not yet retired.

The point that we are trying to get across here is that there are many aging baby boomers who are use to a relatively good standard of living. They do not want and will not give that up easily. This brings us back full circle. The economic down turn has brought about a certain amount of hoarding and a goodly amount of speculation. Gold is part of this speculation and it rightly should be. Last time in part #4 ‘High MS Coins for Speculation – The Wrong Road for the Wrong Reasons’ was covered. Counterfeiting and other scams of numismatic coins will be covered in this section as related by Kal Gronvall’s ‘Gold, and How to Avoid the Scams in the Coin Industry’.
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High MS Numismatic Coins and Counterfeiting

The price of the high mint state numismatic coins is not the only red flag flying in front of you if you are considering buying one of these expensive coins. The other red flag is that these coins are easier to counterfeit than lower grade coins. Why? Because there are two basic ways to determine if a coin is counterfeited, by measuring its circumference and by weighing it. The scary part of buying one of these coins is, that when they are graded, either by PCGS or by NGC, or in-house by a coin company, they encapsulate them in plastic, thereby eliminating the possibility of measuring the coin’s circumference and its weight. If you find yourself the unfortunate victim of having bought one or more of these expensive MS coins, you will be faced with the stark reality of how to determine the coin’s authenticity if there is no way to check either the coin’s circumference or its weight? That’s why there is big money in counterfeiting. Imagine some shysters taking an ounce of gold, adding some copper alloy and minting an MS65 $20 Liberty that they can sell to the unsuspecting public for $3,500 to $10,000. Not a bad profit when you consider that they have about $650 per coin in materials.

Now you might ask the question, “If the two independent grading firms grade every coin from MS61 and above, how can a counterfeit coin get passed them?” That’s a good question. I’m not saying that these companies are dishonest, but I personally talked to a man many years ago whose brother works for one of these two firms. I won’t mention the name of the firm for obvious reasons. One day one of the largest coin wholesalers in the country sent several old gold coins to his firm and told them to grade the coins MS65. The company, without grading the coins, obediently encapsulated them in their official plastic cases, certified them MS65, and sent them back.

Giving gold bullion coins a grade, like the gold American Eagle or the platinum American Eagle, is another scam technique that some gold bullion dealers use. The rule is that only old United States collector coins can be graded. Gold bullion coins do not have any collector value, and are, therefore, not worth a penny more than bullion value. It is a scam to grade them because it does not increase their value or make them a numismatic coin. A few years ago a lady sent me a list of the coins she had bought from a gold bullion dealer in Texas. She had bought two 1999 gold American Eagle sets, a $5 coin, a $10 coin, a $25 coin and a $50 coin. These coin sets were graded by one of the two independent grading firms. And each of these coins was in a plastic case. There were no grades on these coins, but they were in official plastic cases. The amount of bullion gold among the four coin sets was 1.85 ounces, worth approximately $520 at that time. She paid $2,400 for the four coins, or $1,880 in premium for coins that had no numismatic value. She also bought a one ounce, 1998 Platinum American Eagle from the same company, and it was graded MS69 and certified and encapsulated by one of these two firms. She paid twice what she needed to for the bullion platinum coin. The coin company had convinced her that it was a rare coin because it had been certified by one of these two firms. One of my suppliers explained to me how this scam works. Coin companies will send 10 or 20 coins of these bullion coins to these firms and tell them to pick the best four or five coins and put them in plastic cases and grade them at MS65 to MS69. These firms get about $20 a coin to do the dirty work, so it is a good money maker for everyone involved, except, of course, for the buyer.

The Churn and Burn

Another common scamming technique is called the churn and burn. If you have purchased some American numismatic gold coins in the mid-grades, Very Fine, Extra Fine, or Almost Uncirculated, which are the kind of gold coins you should have for wealth preservation, beware of companies that try to convert those coins into expensive, high MS numismatic gold coins. The process is called churning. They will tell you that the lightly circulated numismatic gold coins that you have will not be considered collector coins in a possible confiscation – the government will look at them as bullion and confiscate them. They then tell you that only the high MS coins, which are for collectors and speculators only, will be considered collector items in a confiscation. They will then try to persuade you to convert or reposition those coins into investor coins. Don’t ever do that. One woman in Nebraska had 93 ounces of lightly circulated Extra Fine $20 Liberties. She had the right coins for wealth preservation. Then a very good “Christian company” got a hold of her on the phone and churned and burned. When these vultures were done with her, they had converted her 93 ounces of numismatic gold into 51 ounces of expensive, high MS numismatic gold coins. She lost 42 ounces of gold, which, in an economic crisis, could amount to a tremendous fortune.

A Remedy for the Churn and Burn

The unfortunate victims who were deceived into buying these high mint-state numismatic gold coins for $2,000 to $10,000 per coin, when the dollar fails, will have to break them out of their plastic cases and use them simply for their gold content. In that day, no one is going to even think about buying your expensive numismatic coins for two to three times what you paid for them. At that point you will know what that gold company or that gold broker has done to you, but it will be too late. Ninety-nine percent of the people who buy gold are not collectors. They are just common people who have converted some imaginary money or paper money into real money as a hedge against bad times. In fact, in my 10 years in the coins business I have only run into four or five actual coin collectors.

Till Next Time,

George Hollis