An Oscar = $155,720?
On the heels of the Oscar awards, this TheStreet.com article, What’s an Oscar Worth in Current Gold Prices?, provides a fun look at the Oscar if it was made of gold bullion at today’s rates.
Except, their math seems a little bit off.
Remember, gold bullion weights use the troy ounce not the avoirdupois ounce. Food and bathroom scales use the avoirdupois system of ounces and pounds where 16 ounces equals one pound. In the troy system, 12 troy ounces equals one troy pound.
In comparison, one avoirdupois ounce equals 0.911458333 troy ounce. Perhaps the easiest way to view their comparison is in grams: one avoirdupois ounce equals 28.35 grams whereas a troy ounce weighs 31.1 grams.
In their article on the Oscar, TheStreet.com gives the value of the Oscar at $155,720 based on a gold price of $1145 per ounce. Dividing $155,720 by $1145 equals 136 ounces. Divide 136 by the statue’s weight of 8.5 pounds equals 16.
Since a troy pound contains only 12 troy ounces, their math shows they have mixed their calculation using a price per troy ounce applied to an avoirdupois weight.
Let’s perform the Oscar gold value calculation starting with the statue’s weight in avoirdupois pounds, translate to troy ounces and determine the gold value based on $1145 per ounce.
8.5 pounds multiplied by 16 ounces equals 136 avoirdupois ounces. One avoirdupois ounce equals .911458333 troy ounces. 136 multiplied by .911458333 equals 123.958333 troy ounces.
123.958333 troy ounces multiplied by $1145 per troy ounce of gold equals $141,932.
So, an Oscar would not be $155,720 if made of solid gold at $1145 per ounce. Instead, it would be $141,932.
Perhaps the gold market would be less confusing if the resources publishing prices used the “ozt” terminology for the troy ounce.
Just a thought.
TheStreet.com article goes on to say, “If you want to invest in gold, winning an Oscar might not be the easiest or most profitable way. Most gold advisers recommend physical bullion, which is levered to the spot price not the paper futures market.”
What a fun article even including the mixing and matching of price per troy ounce applied to avoirdupois ounces…
TSNS Show in Chattanooga
For those of you near Chattanooga or within travel distance, the Tennessee State Numismatic Society coin show takes place today through Sunday (March 5 – 7, 2010).
Their web site, www.tsns.org, contains information about the club and their coin shows. They also provide information about the dates and the facility, Camp Jordan Arena, on this page.
Lots of dealers have their coins, currency and bullion on display.
Enjoy!
Gold Backed Credit Cards? Just Odd…
This article, New gold bullion-backed credit cards being introduced soon, strikes an odd chord. Of course, the article does not provide details, but still, just think about it. Credit card (debt) and gold (investment) simply do not fit together in the same sentence much less as a financial strategy.
Generally, people invest in gold as either a numismatic interest in gold coins or as a hedge against losses in other investment vehicles (e.g., the stock market).
Without details and only speculating, the upside of a gold backed credit card could be a potential decrease from the astronomical interest fees some banks charge their best and fiscally responsible credit card customers.
But the downsides, again speculating, seem to far outweigh that advantage.
First, you would have to deposit your gold with the credit card company. This means, of course, that you no longer have control of the asset.
Second, your available credit line would fluctuate with the market value of gold. Depending on how you use the card, you would need to keep a watch on your available credit line.
Third, you would have to pay the credit card company fees for the storage of your gold and the management of the credit card. Plus, businesses go into business to make money, so will they also charge you interest in addition to the fees merchants pay them? Probably.
Now, wouldn’t it be wiser for individuals to cease and desist with their credit card debt?
Don’t misunderstand, credit cards provide a valuable service and contain protections above and beyond those of debit cards for individuals and businesses. In the spirit of “you get what you pay for,” reasonable fees for the use of those cards should be expected.
But, why involve an investment (gold) into the equation?
Perhaps the business plan behind these gold backed credit cards depends heavily on the spending habits of the last fifteen to twenty years. People had to have the latest and greatest, newest and best, things that everyone else had.
Yet as a population in these turbulent times, we have begun spending less and being more frugal with our purchases. That’s good, very good.
People, more and more every day, realize their financial futures depend on taking control. They understand Social Security is a tax on the working people and not a fund they can depend on in their latter years. Many people will not receive corporate pension plans which are almost extinct anyway, and their 401k plans diminish with the stock market.
Perhaps these gold backed credit cards will help people with their money management and fiscal responsibility strategies, but skepticism runs rampant.
Credit cards (debt) and gold (investment) … just odd….
Pennies, Copper and an Earthquake
Have you seen the new 2010 Lincoln shield pennies?
They are available, but not widely in distribution yet. Keep an eye on your pocket change for any bright, shiny pennies.
This year’s shield design recognizes the difficulties and the strengths of keeping the union together. Thirteen bars on the shield represent the states whereas the phrase “E Pluribus Unum” means “out of many, one.”
This year’s shield penny along with last year’s four pennies commemorating Lincoln contain 2.5% copper (Cu) coating the majority metal, zinc (Zn). These metallic proporations apply to pennies intended for circulation.
For the special 2009 bicentennial commemoration of Lincoln, the US Mint presented proof sets of the four pennies with the same metal content as the 1909 versions: 95% copper with the remaining 5% tin and zinc.
Let’s do some simple math for the copper in the pennies for circulation.
The circulation coin presses can strike between 700 and 850 coins per minute with an average of 750. Let’s see, a penny weighs 2.5 grams. Of that weight, 2.5% is copper or .0625 grams.
At 750 coins per minute, 43.875 grams of copper goes through the press per minute. In an hour, the pennies through the press contain 2812.5 grams of copper equaling 99.2 ounces or 6.2 pounds of the reddish brown metal.
For distribution, instead of small bags of 5000 cents each, the mint fills a large bag (called a ballistic bag) with 400,000 cents weighing 2,206 pounds – more than a ton. Of that weight, using simple math again, those large bags hold 55.15 pounds of copper metal along with the zinc.
Why the interest in copper?
Did you know that Chile, who is prone to and just experienced a large earthquake, is the largest producer of copper?
Though the copper commodities markets jumped on Monday due to the fear Chile’s copper production would be adversely impacted, the prices settled down again on news that the copper production experienced only minor interuption.
Back to the copper math, at 24 hours per day, five days per week, the two main circulation mints, Philadelphia and Denver, use 1488 pounds of copper per penny press. Of course, this calculation is simple math and does not represent actual production.
That’s a lot of copper, and considering a penny already costs more than a penny to make, any commodities increases can impact the US Mint’s budget for the penny coins.
Have you ever heard the saying, “When a butterfly flaps its wings in South America, a storm forms in North America?” That saying seems nonsensical.
On the other hand, South American occurrences, such as an earthquake in Chile, can have an impact in North America that you don’t normally think could be related.
Will the US Mint’s production of the new shield pennies be adversely impacted by a fluctuation in copper prices? Probably not, but who knows for sure.
Palladium…an interesting metal
Today, palladium trades for less than a third of platinum, but is that fair?
Palladium is one of the PGMs (Platinum Group Metals). These metals are elements (remember the periodic chart) and share similar chemical properties. In addition to palladium and platinum, PGMs contain rhodium, ruthenium, iridium and osmium.
Interestingly, these metals rarely occur around the world, but they can be found near each other. Nevertheless, their ore can be difficult to mine.
Per the International Platinum Group Metals Association, one in four goods manufactured today either contains PGMs or had PGMs play an important role in their manufacture. Furthermore, PGMs play important roles in automotive, industrial, environmental, medical, technological, jewelry and other miscellaneous applications.
Thinking of the economic rules of supply (difficult to mine) and demand (lots of uses), why is palladium much less than platinum?
This article, Platinum-palladium price gap will narrow further – Stillwater, claims one of the reasons platinum prices remain higher is due to the dominant role South African mines play in the production of PGMs. “This is because the market price for platinum, which accounts for most South African PGM production, will need to be high enough to incentivise miners in the country to bring on new capacity to meet global requirements for the metals.”
Interesting…
But, per the article, the Stillwater mines in Montana produce more palladium than platinum.
Plus, palladium and platinum are interchangeable in some applications such as catalytic converters for cars.
If the same amount of metal at 1/3 of the price (for now) can be used, wouldn’t it make economic sense to use palladium?
Logically, that means the demand for palladium increases. Back to the rules of supply and demand. The demand increases, the supply remains difficult to obtain and the prices should go up.
This article substantiates the increase in demand, but with only a small increase in price. (Demand for PGMs to rise, prices steady) China became one of the biggest consumers of PGMs goods in 2009. This year with emissions rules for their vehicles, they should see an increase in automotive PGMs (e.g., palladium).
Frank McAllister, CEO of Stillwater Mining, thinks the price of palladium will rise to half that of platinum, however he cautions that price will be determined by the market and the speculators.
The disparity in PGMs, in particular platinum and palladium, remains odd and bears watching.
Bait and Switch
Normally, you hear about bait and switch tactics being used by merchants. However, in the coin collecting world, bait and switch can be used by customers as well.
What is bait and switch?
In general terms, bait and switch occurs when a merchant advertises a great deal on one or more products to interest buyers. When customers attempt to purchase this great deal, the merchant is out of the special but has an alternative you can buy. The alternative may be more expensive or it can be lesser quality, either way, the merchant gains a bigger profit margin.
The “baiting” grabs your interest; the “switching” provides greater benefit to the seller.
Now, you’re thinking, “How does this work with the customer doing the baiting and switching?”
Well, it’s simple really, and it’s frustrating, too, for the sellers.
Let’s look at an example between Dealer Jim and Numismatist Bill. Jim can be a large dealer with a store and staff, or he can be an individual seller on eBay. Bill, the buyer, can be another coin dealer buying long distance from Jim, or he can be an indivdual collector.
Either through the internet or other marketing vehicle; for example, cable TV shows or coin magazine ads; Bill buys a coin from Jim. Per the agreement, Jim ships the coin to Bill.
Time passes, Bill decides he is unhappy with the coin and returns it to Jim. Upon receipt of the coin, Jim notices the packaging is different from what he sent Bill. Looking more closely, he notices the coin is not the same coin.
In some cases, Jim confronts Bill with the fact that the returned coin is not the same as the one sent. In other cases, he puts Bill on the “do not sell to this person” list. And, in still other instances, Jim takes the fight public (in chat rooms and forums) to alert others to Bill’s perfidy.
Jim’s actions depend on the situation. Is the dollar value lost worth the cost of the time to fight the issue? The Bills of the world gamble that the Jims will just let it go. But, sometimes, the Jims of the world get fed up with the Bills and fight the good fight to get either their coin or their money back.
If you are a buyer and do this bait and switch with coins, shame on you. Remember the adage, “What goes around comes around.”
If you are a seller, technology helps you especially with small quantities. Yes, the effort adds time to the process, and whether you do it or not depends on your risk tolerance and how much you’ve lost in the past.
What technology? The digital camera.
Before Jim sends the coin to Bill, he takes pictures of the coin, obverse and reverse, and of the box and certificates. He copies the photos to his computer and names the files with identifiers pertinent to Bill, the coin and the date. He can include these pictures with the coin in the shipment to Bill, he can send Bill the pictures via email, or he can note the filenames along with a short description of the pictures on the packing slip to Bill. In all cases, Bill is aware that Jim has photos of the coin.
The deceit of the Bills of the world exists. Sometimes the extra effort to stop them, either before or after they try their dishonest tricks, just isn’t worth it. Other times, the extra time and effort of preventative measures can save you from a large loss.
Grandpa’s Coins
Grandpa passed away a few years ago. When he was gone, he wanted you to have his coin collection.
Knowing his family did not share his passion for coin collecting, Grandpa sold a lot of the less valuable coins in his collection. But, a few, favorite coins he just couldn’t sell. You see, Grandpa’s collecting gene was strong.
Now, you face tough economic times. You lost your job. You found another, intermediate position, but it does not pay nearly as well. You have bills to pay and a family to support.
You know Grandpa wanted you to have his coins for a “rainy day.” Getting deeper in debt and with bill collectors calling, you decide the “rainy day” has arrived.
You pull the coins out to look at them. You fondly remember being small and standing at Grandpa’s knee while he told you about the coins, their history and what made them valuable. With a hint of sadness, you regret not spending more time with Grandpa and his collectible stories as you got older.
Now, you look at what’s left of Grandpa’s collection and do not know any of the details about the coins. They shine with gold and silver brilliance in their protective holders, but what is their value?
You’ve seen and heard the “mail your gold to us” ads on TV. You’ve seen the billboards and the bus stop signs with “we buy gold” messages. Banners hang from jewelry stores and pawn shops saying, “buying gold.”
It’s confusing – where should you go to get the best price for your Grandpa’s coins? And, what about the silver coins?
Very simply, do not send or take your coins to one of the “we buy gold” places.
Your best alternative for selling coins is a coin dealer.
The “we buy gold” people consider the value of the gold. Unless they are also a coin dealer or collector, they do not take into account the value of the coins. In many cases a coin’s value can be significantly higher than the value of its metal content.
Depending on the quantity and the rarity of the coins, you could lose hundreds or thousands of dollars by selling your coins to the wrong place.
Look for coin dealers, either in coin shops or at coin shows. Keep in mind that most coin dealers are generalists, but they also have specific areas of interest and expertise. Additionally, coin dealers operate under different business costs and profit margins – meaning some dealers pay stronger than others.
Ask several dealers for their best offer on your collection and deal with the one you feel most comfortable with their expertise and offer.
A Fistful of Obols?
Since Greece has been in the news and since the below comment in a National Geographic Traveler (Nov/Dec 2009) caught my eye, let’s talk about obols and drachmas.
“The name for the old Greek drachma coin comes from the verb meaning ‘to grasp.’ Originally, a drachma equaled a fistful of silver coins called obols, each worth a sixth of a drachma.”
Not being an ancient coin or a foreign coin aficionado, this, nevertheless, peaked my interest.
Other than Greek coinage, what the heck is an obol and what is a drachma?
As a quick reference, Wikipedia provides good information (though several sources should be used if you need absolute accuracy – they offer cautions about obtaining additional references). Wikipedia’s section on Greek Drachmas explains the overall background of the obol and the drachma.
Similar to the note in the Traveler magazine, Wikipedia says, “Initially a drachma was a fistful (a ‘grasp’) of six oboloi (metal sticks), which were used as a form of currency as early as 1100 BC. It was the standard unit of silver coinage at most ancient Greek and Roman mints, and the name ‘obol’ was used to describe a coin that was one-sixth of a drachma.”
They go on to describe ancient currency equivalents: 8 chalkoi = 1 obolus; 6 oboloi = 1 drachma, 100 drachma = 1 mina; 60 minea = 1 Talent. Minae and Talents were not minted coins, instead they were units of measure for commodities such as grain.
Hmmm…interesting…
Now, the more modern drachma enjoyed three different eras before Greece adopted the Euro coinage and currency.
The first modern drachma began when the coins were re-introduced in 1832. This first period lasted until 1944.
After Greece was liberated from Germany in 1944, the second drachma period began with an exchange rate of 50,000,000,000 to 1. (Wow, an exchange rate worse, much worse, than some of the world currencies today.) Only paper was printed for this second period.
In 1954, Greece started their third period for the drachma. This period was an attempt to halt inflation by changing the values of their money at a rate of 1000 to 1.
In March of 2002, the Greek drachma, as a currency, ceased to exist in circulation, being replaced with the Euro.
At the time of conversion, 500 drachmas, one of their denominations, exchanged into 1.47 Euros.
It’s amazing what you can learn when a simple statement in a waiting area’s magazine peaks your interest.
Of course, if you have an interest in ancient or foreign coins, the monthly coin show has dealers who specialize in those types of coins.
Say vs. Do…interesting…
In reviewing the various commentaries, this one by Greg Hunter titled “Do What Soros Does, Not What He Says” struck me as interesting.
It seems Mr. Soros claimed, “the ultimate asset bubble is gold,” yet his fund management group became the fourth largest investor in the SPDR Gold Trust. (Soros More Than Doubled Gold ETF Stake in 4th Quarter) Plus, “gold is now the single largest investment in the multi-billion dollar fund George Soros runs.”
Furthermore, Mr. Hunter found other investment authorities buying gold as well.
“Other big financial players are seeing trouble too–that’s why they are buying gold. John Paulson, the hedge fund manager who made billions shorting the housing sector just as the subprime mortgage crisis got underway, started a gold fund late last year. David Einhorn, another investment guru who made a mint shorting Lehman Brothers long before it went under, bought thousands of ounces of physical gold for his fund early last year.”
Now, let’s look at recent market information.
First, TheStreet.com talks about Gold Prices Rebounding. Gold prices fluctuated this week due in part to the IMF announcing they planned to sell 200 tonnes of gold and the Chairman of the Fed announcing an increase in the discount interest rate from 0.50 to 0.75 percent.
Similarly, The Motley Fool commented that not only Olympians can enjoy gold and silver with their article, Your Moment to Go for the Gold and Silver. Isn’t it timely that the Olympics coincide with increases in the metals markets?
Looking at a broader timeline, the commentary, Gold’s Bull Market Turns 9 Years Old, reviews gold’s performance over the years. They chart the performance of gold against major currencies and note, “Gold Remains Strong in All Currencies.”
They end their analysis with the viewpoint, “Pressure is likely to stay on gold and the metals in the weeks ahead, which means it’s time to take advantage of weakness by adding or buying new positions. Gold’s major trend remains up, indicating it’s headed higher. But for now, it will temporarily remain under downward pressure by staying below $1110.”
In conclusion of the initial commentary, Mr. Hunter says, “‘Do What Soros Does, Not What He Says,’ because he is worried about something, and you should be too.”
Now, is Mr. Soros worried? Or, is he a savvy investor who knows how to read the market and the economics of our country and the world?
I vote for the savvy investor.
Could this be the right time for a significant gold and silver investment?
Continuing the Cautionary Tale
Do you think slabbed coins – those coins from grading services in protective holders – cannot possibly be counterfeit?
Think again.
Generally, grading companies assign a identifying number to each coin they grade. Several grading companies also include a bar code and a holographic label. Grading companies design their holders to maximize viewing the coin while protecting it in a sealed environment.
Look at this link for a list of grading companies along with example pictures of their holders. Make sure you also look at pages 2 and 3 where they list out-of-business companies and do-it-yourself slabs.
In all likelihood, counterfeiters buy legitimate slabbed coins and spend time copying those specific coins along with their holders and labels. Of course, if one researches the identifying number of the coin, it will be listed and in some cases even include photographs on the grading site.
What’s the saying? “The best defense is a good offense.”
Educate yourself as the start of your offensive strategy.
Make sure you know the various slabs from the variety of grading services. Go to their web sites to view their slab information. If available, read what each grading service is doing to counteract the counterfeiters and to educate numismatists about invalid copies of their graded coins.
Though not the recommended way to learn in this case, experience remains a great teacher. Read the forums, talk to other numismatists, ask coin dealers and learn from people who mistakenly bought counterfeit coins or know about the experiences of other people who did.
Both NGC and PCGS include articles and helpful tips about counterfeit slabs. Plus, on the upper right corner of the PCGS page, you can enter “counterfeit slab” in the search field. The search results contain many forum comments about counterfeit slabs.
Just think of all the information you will learn as you educate yourself against the counterfeiters!
