Coins vs. Bags: Comparing Two Options in Physical Silver

[Twisted Titan]

http://seekingalpha.com/article/244020-coins-vs-bags-comparing-two-options-in-physical-silver



Financial advisors always compare the advantages of one stock, ETF or mutual fund over another and write articles explaining their position. Gold dealers are no different. It’s important to understand the advantages and disadvantages of each type of metal you purchase before making the decision to buy.

Add to this the fact that the price of silver has risen remarkably in the past few years and investors are wondering the best way to take advantage of this price movement.

For this analysis, I have left out any comparisons to silver bars, as I believe investors should own silver coins as a basis for their portfolio. Silver coins, as will be explained later in the article, can provide the means of profit as well as be used for barter should the economy slip to those depths in the future.

39 Million Silver Eagle Coins Bought in 2010

Many people want to buy the one-ounce American Eagle Silver bullion coins, but for the life of me I can’t figure out why they want to pay such a high premium for owning them. Yet U.S. Mint sales figures show they have already sold over 39 million one-ounce Silver American Eagle coins in 2010, surpassing 2009 sales by over 11 million and 2008 sales by 20 million.

In my book Buy Gold and Silver Safely, I go into detail about the advantages and disadvantages of owning various gold and silver bullion coins and bars. I point out that when investing in silver, there is one clear winner for coins: 90% silver bags. This may come as a surprise to those who bought one-ounce Silver American Eagles ... although the Silver Eagles sure are beautiful coins.

You Want the Most Silver for Your Money

When making a decision to buy silver, you want to purchase the most silver for your money. This means that you want to buy silver as close to the spot price as possible. For new investors, the “spot price” is simply what the price of silver is at any given moment in time, as priced on the exchange. You want to buy silver as close to this price as possible, taking into account there will be fees paid to the dealer for acquiring the silver (shipping, handling, commissions to dealer).

The problem is that not all silver purchases are alike. With certain types of silver coins, you have to pay more to acquire them. The question I ask of buyers is, Why would you want to pay more? Isn’t the goal of acquiring silver to obtain as much as possible of the metal for your Federal Reserve Notes?

The best thing to do is to compare the pricing of the two most popular silver coins side by side.

Comparing Pricing of the Two Most Popular Silver Coins Paints a Clear Winner

The most popular silver coins are the one-ounce American Eagle bullion silver coins and the 90% silver bags of pre-1964 silver quarters and dimes. The 90% silver bags have a face amount (value of the quarters and dimes) of $1,000 and contain 715 ounces of silver.

The following table shows the extra premium one pays to acquire American Eagle bullion silver coins through most any gold dealer. I use an investment of $100,000 and show the additional ounces of silver that can be obtained by buying 90% silver bags instead of one-ounce Silver American Eagle coins with this amount.



The Buyback on American Eagle Silver Coins Is Higher Than Spot; However …

What’s interesting is that as of today, the buy-back price on one-ounce American Eagle Silver coins is higher than spot. However, the overall advantage to 90% silver bags is in the fact that you can acquire 282 more ounces of silver that can go to work for you as seen in the following table:

(This table shows liquidation proceeds and pricing assuming the price of silver doubled in the years to come with American Eagle one-ounce silver coins and 90% Silver Bags.)

Wouldn’t you prefer to have that extra $6,000 in your pocket? If so, then the 90% silver bags are a superior investment to one-ounce American Eagle Silver coins.

Gold Dealers Need to Do What’s in the Best Interest of Their Client

Why aren’t other gold dealers directing clients to what makes the most sense? Sure, a good “salesman” listens to the prospect and then gives him what he wants, just to make a sale. But every person who calls into a company that wants to buy silver should be educated on what makes the most financial sense. If they still want to buy the one-ounce American Eagle Silver coins, then at least they have heard what makes more sense for their portfolio first.

There Are More Reasons That 90% Silver Bag Coins Make Sense

The 90% Silver Bags consist of coins -- dimes and quarters -- that were once used as money in the United States. In 1964, one could take a dime to the store and buy a loaf of bread (if you are old enough to remember). Today, that same 90% silver dime is worth $2.10, enough to buy a loaf of bread.

These American coins would become the type of coin used in barter if our monetary system ever deteriorated to the point of hyperinflation. It wouldn’t hurt one’s portfolio to pick up a bag or two at a minimum for this reason. At least you’ll know your dime can still get you some bread … unlike the dimes printed by the U.S. Mint today.

[Twisted Titan]

You Mark My words

All of us will live to see the day when the Mercury Dime will fetch a LEGENDARY PREMIUM.

T

[Ponce]

The price between the two of them depens as when you got it..........for example........my one oz of silver was only $5.16.......try to get now the same for that price.

[Twisted Titan]

When it's priceless, who cares what you payed.


DING!!!!! DING!!!!! DING!!!!! DING!!!!!! DING!!!!! DING!!!!!! DING!!!!! DING!!!!!

[Ponce]

When it's priceless, who cares what you payed.


The one that does not have it..........simply ;D

[Book]

Try telling that to Book. ::) http://gold-silver.us/forum/silver/silver-dime/


I stand by it.

|--0--|

[hoarder]

Pre-1965 90% US coins are a no-brainer. When I started buying silver I was hoarding 100 oz bars. Silver was around $5 or a few cents more back then and I was paying a 40 cent per oz premium on bars.
Some guys on GIM1 way back then pointed out the advantages of 90% and I switched my strategy.

Each bar that I paid $40 extra for could have purchased almost four extra ounces that would be worth about $120 now.

So a 100 ounce bar I bought in 2002-2003 for $500 plus $40 premium has given me a return (if I still had it) of:

2003 $500 for 100 ounces, 2011 $3000 for 100 ounces. 600% return on investment!

2003 $40 premium on 100 ounces, 2011 $40 premium on 100 ounces NO RETURN ON INVESTMENT!

I'm glad I got over the "shiny object syndrome" quickly and bought 90% junk silver!

[vacuum]

I think that he is right in the long term, but in the short term, when the government stops minting SAEs, there will be a point where the premium on them will be quite high and at that point you can trade them for bags of 90% and get more ounces than getting bags in the beginning.

[cedarchopper]

Tulving's spread between his buy/sell is .60c per oz on 90% and .50c on SAE's. Tulving is the exception when it comes to the price dealers will pay for 90%...most discount it substantially when you try to sell it to them. More dealers and individuals will pay market prices for SAE's. I've sold at the gun show before and people pass on the 90% at market prices and but bought the SAE's...no comparison on the volume of sales to the public.

In the end, it will be about liquidity.

[jaybone]

Variety is the spice of life, and silver.

[SLV^GLD]

If you are buying bags by face value you are losing ounces.
Either buy bags by weight or be diligent about picking low wear coins.
Try weighing a bag of worn 90% sometime and prepare to be astounded at how much silver is not in there.

[hoarder]

If you are buying bags by face value you are losing ounces.
Either buy bags by weight or be diligent about picking low wear coins.
Try weighing a bag of worn 90% sometime and prepare to be astounded at how much silver is not in there.
A $1000 face bag should weigh 54.47 pounds on a bathroom scale. Figuring the 10% copper, the remaining 90% of total weight should equal 715 troy ounces.

If you're worried about weight, sell off the walking Liberty Halves which bring a premium over 1964 Kennedy halves.
The 64 Kennedy halves are more than 715 Troy ounces per $1000 face bag.

People will actually pay more for older dimes, too.

When silver hits $200, all the numismatic/nostalgia/shiny object syndrome will take a back seat to actual weight.

Bottom line, get the most physical for the money.

[Sparky]

I think that he is right in the long term, but in the short term, when the government stops minting SAEs, there will be a point where the premium on them will be quite high and at that point you can trade them for bags of 90% and get more ounces than getting bags in the beginning.


Good insight.

[agnut]

Thanks for posting this Twisted Titan; always happy to see discussions on types of physical silver to hold.

I have only Mercury dimes; no Roosevelt dimes. I got them when there was no premium. Nobody can mistake a Mercury dime as containing 90% silver. The same holds true for my Walking Liberty halves as opposed to the later Kennedy halves.

I believe in having 1/3 in 90% coins, 1/3 in silver rounds and 1/3 in sterling silver (jewelry, dinnerware, etc.) Call me crazy but that is my best guess for the future as I see it.

I like how the author cavalierly suggests to “pick up a bag or two at a minimum”. And a bag costing in the neighborhood of 20 grand plus, I wonder how many folks have that kind of money lately. Not criticizing but the author makes picking up a bag or two of 90%silver coins not unlike ordering a couple of cheeseburgers at the drive up window of McDonalds.

Whether someone bought silver when it was $5 per ounce 10 years or more in the past or at $30 per ounce today, buying silver has been an act of determination and seeking preservation of purchasing power through time. As far as I am concerned, there are only good and GREAT times to buy silver. That is, as long as the government created masses of dollars out of thin air.

Notice that the so called Quantitative Easing 1 and 2 have gone to the banks, bonds, stock markets and large corporations while nothing has trickled down to the man on the street. The only trickling down I’ve seen is one of a uric acid nature. In my observations, business is off a considerable percentage and many businesses are hanging on by their nails in hope of a rebound. And what business would be hiring in such an environment ?

Here’s a thought. As a company lays off workers, the other workers still employed must take up the slack and work twice or three times as hard. I have heard and read of this many times. So far so bad. But when/if business does someday return, how willing will companies be to hire workers in order to relieve the heavy burden of the workers that they had not laid off ? I believe that this will happen only when business is so bursting out that workers are needed to handle the increase. Does anyone really expect this to happen in the foreseeable future ? A permanently poor large percent of the population has been created in my opinion.

So what does this have to do with silver investing ? Well, in the first place, these permanently unemployed will not be capable of investing in precious metals. Their first priority is survival somehow; food and shelter. In the second place, those of us who are still employed or capable of insuring our future should be all the more aware of this situation and redouble our efforts to procure more silver so that we may not later fall into the debt/liquidity trap as a result of devaluation of the currency.

Gold and silver are insurance policies. Long term investments against the ravages of inflation/repudiation of fiat currencies. Gold and silver do not provide interest payments but they are of utmost interest to the wise. Gold and silver do not offer dividend payments but far greater is the “dividend” of peace of mind in that one is acting in similar manner to what mankind has done for thousands of years, realizing that the last 100 years or so of fiat currency has been an aberration, a disconnect from honest money. Gold and silver, unlike fiat currency, do provide principal in that their value is intrinsic or within their metal content itself.

The general populace feels the devastation of fiat currency’s corrosive effects but is incapable of making the connection to the cause. Don’t be angry at them; it is a long road on the study of what is and what is not money. Rather pity them and be thankful that there go I but for the grace of God. Additionally, understanding and having faith in gold and silver requires a mighty paradigm leap into a different world. I say a paradigm leap because it is a whole different world into which a precious metal owner finds himself. This brave new world views economics, politics, banking and most everything from a wholly different perspective. And an adventuresome mindset is a necessity if one is to feel at home here.



Ponce says to forget what silver is worth in dollars. Instead, ask yourself what silver will buy through the years. Fiat paper dollars are intangible. So buying tangible goods with fiat dollars works ONLY as long as the seller is willing to accept them.

Now buying tangible goods with silver or gold is trading tangible precious metals for tangible goods that we all need through time. Problem here is that there is no need for the government or bankers to tell us what the gold and silver are worth. And fiat currency is where they make their money and the source of their power. So being TPTB, precious metals run counter to their continuance. Being a banker is a great job as long as you don’t get caught.



Best wishes,

Agnut

“There are two ways to conquer and enslave a nation. One is by sword. The other is by debt.”
– John Adams

[Twisted Titan]

The general populace feels the devastation of fiat currency’s corrosive effects but is incapable of making the connection to the cause. Don’t be angry at them; it is a long road on the study of what is and what is not money. Rather pity them and be thankful that there go I but for the grace of God.


AMEN ON DAT!!!