A CoinWeek Exclusive Interview…

At the Central States Numismatic Society’s 76th Annual Convention, CoinWeek editor Charles Morgan sat down with John Kamin, editor of The Forecaster Moneyletter. In this interview Kamin discusses speculating on numismatics, the buying and selling of “factory coins”, and areas of the market where most anybody can buy into and possibly reap profits from down the road…

Charles Morgan: So John, there is a lot of trepidation in the numismatic marketplace right now, a lot of dealers are afraid of a market correction. What do you think about these fears? Are they based on reality or are they self-fulfilling prophecy?

John Kamin: Every country in the world today is printing fiat money. Currencies unbacked, not backed by gold and silver–traditional hard money. This is an unprecedented situation. No one, including me, knows how this will turn out. What we can do is go back 200 years to Dr. Adam Smith, the father of economics, and the revolution in France in the 1780s and 1790s, which brought the emperor Napoleon into power–a tyrant in high own right–and we can study other elements in history, such as Andrew Jackson and his fight with the Second National Bank of the United States, which later went out of business. We can discuss the Wild Cat banks, little banks that would get a charter and then print their own currency; unfortunately it was all fiat money, and when people went to cash in their currency they couldn’t get anything for it.

Numismatically many of those fiat money notes are very valuable today…

CM: They are much more valuable today than they ever were when they were in use…

JK: They were just wallpaper back then. So, as I was telling you, we don’t know the outcome. What we can do is limit our risks somewhat by owning some hard money: gold and silver.

I came into numismatics through the backdoor. I was studying money and banking, economics, formally since the 1950s and carried it through… I remember buying silver when it was 91 cents an ounce in 1962 and silver dollars when you could get all you could carry for $1.00 a piece… or maybe if you just bought certain dates you would pay $1.20 a piece.

I couldn’t afford at that time, as a grad student, many of the $20 gold pieces, which had $35 worth of gold. But they would cost a dealer $37 or $38 dollars and everyone thought that that was an outrageous price for a $20 Liberty in choice condition or a $20 Saint-Gaudens. $10 Libs and $10 Indians were much more affordable at that time. A week’s wages during the early 1960s in a factory was $80 before deductions, and maybe $65 after a week of hard labor in a big city factory.

So, I put away what I could… so did the people I was writing The Forecaster for since the early 1960s–we’re now celebrating our 53rd anniversary–and we’ve had a lot of fun with silver dollars, Franklin halves, Walking Liberty halves.

merc_dimes_groupRight now we’re having a lot of fun with Mercury dimes because when you buy nice BU [Brilliant Uncirculated] rolls of $50 for $300, $400, $500 dollars, that’s only $6 to $10 for a BU coin.

And even the kid who is cutting your lawn or sweeping your sidewalk can afford that if he wants to work on a Saturday morning. Or maybe shovel out the snow from your driveway.

So, there’s still a lot of opportunities in what we call a “tangible assets” strategy. What do you think a roll of BU mercury dimes will sell for in 2025, 2035, 2045? I don’t know… but I do know I can buy them by the roll for $6 to $10. I like the mintmark dates more than the over-issued World-War-II-era Philadelphia dates.

CM: It seems like we are just coming off now a bubble in precious metals- and I don’t necessarily mean with prices- but all across America we saw a proliferation of “Cash for Gold” bullion stores pop up, and Americans in the middle class and mostly in the working class, who have been struggling in this economy, have been liquidating their precious metal assets–either jewelry, necklaces, things like this, even coins. But now we are seeing this type of business, this scrap metal business is struggling now as prices have come down. What do you make of this market correction? Are we getting to the point where maybe this segment of Americans is tapped out of their precious metal holdings?

JK: As a contrarian I try to do the opposite of widely-accepted public opinions. I search for cycles and the psychology of those cycles. As a bargain hunter, as a speculator, I like to buy when things are cheaper.

One of my clients in particular just bought 10 foreclosed houses in Las Vegas. He’s making a fortune. He just started doing this at auction sales of bank-repossessed properties. He told me the other day, he has nine of them rented out. The tenth one is the fly in the ointment, because that had a lot more rehab than he anticipated.

CM: Well, if we could all be right nine out of 10 times….

JK: You won’t always be right. People who make a lot of decisions, if they are right seven times out of 10, that’s very good. If they are right five times out of 10, they can make money because the secret is to let your profits run and keep your losses small. So you might have a bunch of small losses, but we’re not scrap dealers. So if you get one big gain of 1000% and you make a couple of innocent five or 15 percent blunders along the way, that’s ok. It just shows that you are human.

When you let your profits run… if silver was 91 cents in 1962 and by 2011 it hit $42 an ounce… I would say that that’s a nice speculation. We are all speculating when we cross the street, go home at rush hour, or even jump into the ocean for a little surfboarding. And all we can do in life is to try something. If it doesn’t work we make an adjustment until it does work and then we try something else. And we’re constantly doing that. If we are afraid of mistakes then we will never make any money and we’ll never really do anything, and we’ll never advance.

So popular psychology is in silver and gold markets, in precious metals markets, in rare coin markets. People look to buy, they line up to buy when prices are going up. But let it drop 40% and it will only attract crazy people like myself and those who are contrarians because we like to buy valuables when they are discounted 40% or 50%. We may not catch the bottom, but using instruments we’ll be pretty close… and we’ll get some of it before the next rise. So for us, this is a very good market for my clients and the readers of The Forecaster.

I have written 18 books, mostly on making money. And I’m working on number 19 on cycles. Spotting trends, spotting patterns, spotting cycles before they are apparent to the general public.

CM: One of the things I see now with alternate-investment-type people is a move towards certified modern bullion coinage. You see it mass-marketed to the public, the general public – silver eagles or gold eagles and things like this. What do you think of it as a strategy, and is it something that you think the public is buying with an understanding of its future potential? Or do you think that it’s something that’s dangerous?

JK: I see two trends that haven’t been talked about. One is that people who are buying these modern factory coins–and you have to consider the mint a factory–have never tried to resell a coin. Yet on the floor below us, there are many hundreds and maybe thousands of people who are buying and selling, selling and rebuying, and they have a much better feel for the market than the people who are watching cable TV or looking at their smart phone, who are getting advice from people on TV… but they have never resold the coin, so they don’t really have a good feel for the market.

If you buy a new car and drive it three years and try to resell it, believe me your attitude toward car buying will change. So that’s one of the things I see that people are neglecting on overgraded common coins, such as silver eagles. They are overpaying 50% above of the silver melt value and I just did a lengthy article saying bars are not coins; round discs, medallions are not coins (they were never intended to be used as money) and if you think opposite and you want to pay $90 for a silver eagle you better try to resell it and see if maybe your thinking will be adjusted a little bit after you try to resell it.

You may not buy the beautiful coins of the Canadian Mint or the Chinese coins of various years. For when you try to resell them, for as beautiful as they are, they might bring close to their melt value–maybe a little more, maybe a little less. I’m not saying that there aren’t some rarer issues, but you aren’t likely to run into people who are buying those rarer issues casually.

If you got to Canada, they do have a lot of coin collectors, but there are probably only one-tenth of them as there are coin collectors in the USA. I’ve always found it difficult when I resell foreign coins–those beautiful Canadian coins–that dealers aren’t stepping up to the plate quickly to pay you much more than melt value. An example is the 1964 Canadian Prooflike Sets; with the silver dollar, the entire set contains 1.1 troy ounces of silver and when you go to resell it – these sets are over 50 years old – you will be lucky to get silver melt value out of that

CM: With your economic training and looking at the coin market as a whole, is it possible to say that the coin market is a failed market? If you have the first line of sales transactions, where they are going to get their full retail value out of you as a customer, but then when you try to sell it to anybody nobody wants to step up to buy it back. That’s not a healthy marketplace?

JK: Yes. I have many clients, for example, who will pay hundreds of dollars that is advertised, maybe even a foreign coin, that is advertised on cable tv or online but they haven’t measured resale and they won’t spend $15 for the 2016 “Red Book”, the Guide Book of United States coins. You and I have probably met people who have called themselves collectors, who have collected for 10, 20, 30 years. Then someone passes away or they give it to the grandchildren, or whatever they do, and then they find out at that time, 30 years later, that they saved all the wrong stuff.

silver_eagles_tubesCM: Well, I ran into a collector. The same thing. He thought he was an investor. And so I looked at what he had and he spent $10,000 on $3,000 worth of coins, essentially. And I said, my question is, if you are collecting these coins because you love the designs, there’s nothing wrong with that approach, but you need to learn more because you can get better coins for less money. But if you are doing this as investment, the first thing you need to do is sell everything you own because you’ve already lost the money – you should try to get back as much as a you can. And then, if you only have $150 or $200 a month to spend on coins, buy every 1936 to 1942 proof Lincoln cent that you can find in a certified holder, until you have 150 or 200 of them and then wait 20 years because they are going to be much more valuable than what you already paid for… and that way you don’t have to think about it. You have a strategy that’s easy to execute that makes sense. You’ll also have a stockpile of coins that are inexpensive now, have low mintages for a modern coin, and that will have a collector market down the line.

I also find, a lot of times, when I do appraisals for people whose family member who was a collector has died, I find that they can spend $30,000, $40,000, or $50,000 and end up with a couple hundred silver eagles and a couple one-tenth-ounce gold coins and little of value outside of that, and the family is always just disappointed because they feel that their parent or loved one was taken advantage of–because they truly believed that they were leaving something for their family and that they thought that were ahead of the curve doing this alternate investment. But at the same time, they paid $100 for a $20 piece of silver.

JK: Yes, I get where you are going with that. Let’s talk terminology. I call myself a speculator. If I’m buying real estate for cash flow rents, or Las Vegas houses because they cost me $100 a square foot and they cost someone else a few years earlier $300 a square foot for modern construction, I’m getting the lot free. This is just construction cost on the lot; that looks to me like most of the risk has been already washed out of it by previous owners or previous buyers.

So, as a speculator, my attitude is a little different. I am buying for resale–not to sell to any particular walk in customer–but because I know somewhere along the line I have to recover my capital and hopefully make a profit. I cannot tell you whether it will be in two years, 10 years, or it might take 15 or 20 years.

When the Treasury released all the silver dollars in the early 1960s, by 1974 you could still buy 1000 BU Morgan silver dollars for $1200 a bag. What was the risk? 20 cents a coin? So, if you are willing to call yourself something other than an investor, then your whole psychology changes. And I like the strategy of owning tangible assets, as opposed to paper assets. I get a computerized statement from a stockbroker and it’s no fun to look at. Whereas if I look at a Walking Liberty half dollar from 1917 and I see that the little mint mark is on the obverse of the coin instead of the reverse, then I know that one day that will become a necessary coin for a type set. Because in 1918 and forever after, they were putting the mintmarks on the reverse of the coin.

If you like low mintages and scarcity, people say “well, there’s nothing like that out there today, they are making 40 million silver eagles a year”. But they are also making 2014 First Spouse gold eagles – one-half ounce of gold and sure, they cost you $800 or so each, but to date all four 2014 issues of the First Spouse half ounce gold coins sold less than 2,000 of each. Well to me, 2000 mintage on a current factory gold coin that comes in a fancy box and makes a wonderful gift for a youngster who will be forced to learn something about history and past presidents and their spouses–a sneaky way to get that kid some education that he’s not getting in school–he can have a low mintage coin and by the time he goes to college in five to 10 years or how ever many years later, he won’t have to take out a $50,000 student loan and even if his text book for a certain class cost $300, he’ll be able to sell one of those coins and buy textbooks for five classes.

As a speculator, I’m speculating on the rising cost of tuition and textbooks, [on] the rising costs of construction of houses. I try to stick to growth areas, whether it’s coins or real estate. I like to buy collector cars, such as muscle car convertibles from the 1960s.

A 1967 Mustang convertible recently sold for $521,000 and it had over 250,000 miles on it. In 1967, I bought a nice red Mustang convertible and I paid $2,900. And I would say that the change from $2,900 to an auction price of $521,000 was a pretty good deal. I unfortunately wore mine out and bought something else, but there are always opportunities [in] tangible assets and collector items. Yet the next 50 people who walk past us will think they should lease a depreciating car where they will never have any equity. I like to buy vehicles that I can drive, have fun with, and that will appreciate instead of depreciate when I drive them.

And I like to do them with gold and silver coins. With trade dollars–wonderful deals in trade dollars. For a couple thousand dollars, 1879 to 1883. Type 2 $1 gold pieces. MS60 wholesale is $1600 each. You get them in a PCGS and NGC holder; they are fun to own and fun to look at- and you can resell them.

Probably for five or 10 years for much more than you paid.

If you don’t like that you can buy BU three-cent silver pieces. Most of which were melted in the Civil War. They had to melt all the silver to ship it to France or England to buy uniforms, or muskets, or whatever else they needed to buy during the Civil War. So, the mintages there have been reduced by probably 98% because of the Civil War meltdowns.

But people are not getting into the facts the way they used to, they are trying to save money on the Red Book, and they are saving all the wrong stuff. They are overpaying for common coins, for common factory coins, such as the current silver eagles. To the point that it’s becoming a commodities business where they are paying four times more than the silver is worth.

Copper is $3 a pound and people are paying $5 for a one-ounce copper coin.

CM: You can just go to the bank and stack up bags of pre-1982 pennies and get those at face value.

JK: I read in Tony Robbins newest book, he talks about a Texas Investor, a stock market guy that is putting away tons of circulated nickels. He thinks he’ll make a fortune out of it because it costs the Mint eight cents to make a five-cents nickel. What he’s overlooking is that there is just 4.5 cents worth of base metal. There aren’t collectors stumbling over themselves up to buy circulated Jeffersons, and there’s [sic] prohibitions against exporting or melting those coins. I would bet you a cup of coffee that as a speculator, that that guy who is putting away tons and tons of junk nickels doesn’t know about the export prohibitions or prohibitions against melting.

Well, you got my motor running….

CM: Tell me about The Forecaster and how someone would be able to subscribe to it.

JK: Well, we’ll give you a 10-issue try out for $59, or, we’ll give you 40 issues–it comes out weekly–that’s a full year for $100. We’ll put a golden guaranty on it, that you can cancel anytime. You get a couple issues, you decide it’s not for you, we’ll give you a complete refund on all the unmailed issues.

If you don’t subscribe, you’ve basically admitting and betting against me that, in my lifetime, that I won’t have another money making idea. I’m betting against that. I’ve been giving people money making ideas for more than 53 years.