Sherman and the Half Bag

August 29, 2001

This piece entirely deals with what to do with dollars. Of course it can also apply to Francs, Pesos, Yen, Pounds, or what have you, depending on what the economic situations are in the nation in which you reside. I say this, because I receive e-mail from all over the world, even though I do not deal in gold and silver outside America. I am delighted to answer all mail, and send the free book I offered around the world, also.

Let's deal with dollars. A man goes to work, and brings home a salary paid by check; denominated in dollars in this case. He usually deposits the paycheck in a checking account, pays his bills, buys his fuel, groceries, and other miscellaneous needs, and if he is lucky, he has a few bucks left. What to do with them? There are several things to do with surplus assets. Some awful, some fun, and some smart…in my opinion. (There are as many opinions about religion, economics, and politics as there are drops in a gallon, I am sure, but these on economics…are mine.) Look at the dollar's history, first of all. (1) It is legal tender in America, meaning that it is used for trade, although much bartering takes place, and it isn't illegal. (2) The dollar has lost about 95-98% of its purchasing power in the last 75 years. (3) Its future is unknown, but based on history, which always seems to repeat itself, it will eventually become worthless, like all other unbacked currencies. It's close already. (4) As long as we are a tiny bit free, we can buy and sell things as we please. Garage sales, stores, services, etc. can still be used and performed for dollars. (5) Things can "go up" or "down" in dollars, even though the dollar steadily "goes down," as its quantity goes up (inflation). (6) In order to preserve our sanity and net worth, we must do smart things with surplus dollars, because the dollar is not your friend, being as its purchasing power goes down continually. (7) When we invest in something that we hope will go up faster than the dollar is going down, we must be able to convert the investment into dollars quickly, if we need them, and at low cost. (8) The investment must be universally recognized as the ultimate in desirability, in order to convert back to currency with little "spread," which is the difference between the buy price and sell price. Gold and silver now have "spreads" of $5, and 60 cents…pretty low. Numismatic coins have huge spreads, and dealers often mark up their prices from 30 to 50%. Used cars generally have large markups as well.

A client of mine, used the comparison of a cup of coffee to me last week, and it is excellent! When I was a kid, a cup of coffee at my Dad's drug store's soda fountain (seen one of those lately?), was a nickel. Since I grew up in one of these, I know this to be a fact. Today, a cup of coffee in a restaurant, even in a McDonald's can be from close to a dollar to way more. Let's average it out at a dollar. The undeniable arithmetical calculation has to be, that the dollar has lost 95% of it's purchasing power since I remember nickel coffee as a kid, less than 60 years ago. The dollar then, is a poor denomination to save in, because not only does one have to pay taxes a second time if you place it in a savings account, but it is losing it's value. I would love for you to call me and buy gold and silver from me as a wonderful place to save surplus dollars, but there are other places…which brings us to Sherman and the half bag. See photo below.

Last week, for the sixth day in this small town, appeared an ad for the car above. It is a 1979 Lincoln Mark V, Cartier version, with every known accessory furnished in 1979. It is flawless, and I bought it for $1200. The seller, a little old lady, had become a widow 3 months ago. The car was her husband's pride and joy. It weighs 4,600 pounds, and is really an absurdity…except it is in demand by car collectors. According to Hemmings Motor News, is worth from $5,000 to $8,000. On the fender of the car, which I have named "Sherman," as in Sherman Tank, is a half bag of US silver coins. Today, they are worth $1600, and weigh 30 pounds. Sherman weighs 4600 ponds, and is 20 feet long. Can I sell the bag of silver coins for a profit tomorrow? Probably not, but in the future I can. In the mean time, I do not have to store, insure, license, pay taxes on, or feed gasoline to a half bag of silver coins. They can sit in my home, undisturbed, for as long as I wish, with no taxes to pay on them, no licenses, and it takes up a lot less space. The little container next to the half bag is $1200 worth of gold at today's prices, takes up but a fraction of space the silver takes, and weighs 5 ounces.

I'm taking Sherman on vacation today, and when I get back Monday night, I will have traveled in supreme comfort, probably gotten 15 miles to the gallon, and will probably sell it for $4,000, well under the market price, and make a profit. Want it? I will have done well, but this was a fluke. The lady had no idea of its value, and no one else in my small town wanted it with gas at $1.50 a gallon, or they didn't want to "speculate." Any investment of your dollars is a "speculation." It is so, because you take a chance that your investment will "go up" in dollars faster than the dollar will "go down." I think I'll do OK with Sherman, but I did poorly in futures last year, and my speculation turned out to be bad. We all make mistakes. You have to take chances! Investing surplus assets in items for future sale and re-conversion into dollars when you need them, makes a lot of sense, and I really believe gold and silver will be best…long term…or at least longer than a week. Long term, or short term, investments in our surplus dollars must go up faster than the dollar goes down.

I bought Sherman as a lark. It's a riot driving the thing. Smooth, quiet, and huge. I got it for a bargain…39 cents a pound, and I'll sell it for 88 cents a pound, also a bargain. I will have made instant profits, but it isn't nearly as easy as doing the same with precious metals! Metals will take more time. We don't know how much, but probably not tomorrow. If it is tomorrow, and it could be, the weeping and wailing will be something to hear. I have one guy who wants me to call him when "bags" are $3,000. I doubt that it will ever happen, but hope springs eternal in the human breast.

Like getting off the NASDAQ, when to get on and off of an investment is really difficult…unless you aren't a penny pincher. Gold and silver are at virtually rock bottom, as far as cost of mining and production are concerned. A new Lincoln with all the bells and whistles Sherman has on it, is from $45,000 up, and I got it for $1200. The bottom.

So have fun kiddies, and play with your toys. Look for the bargains, and do anything you can to get something that will go up faster than the dollar is going down. This will prove to be more and more problematical as each week and month pass. Protect yourself.

A one-ounce gold nugget is rarer than a five-carat diamond.

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