Price List & Market News

(Putting theory into practice takes work!)

Silver Stock Report

by Jason Hommel, April 29th, 2009



We had an interesting day at the Coin Shop.  At least 4 people called saying they wanted to sell 20 ounces of gold Eagles or more.  None were bought in.  One phone caller was a prior seller, so not all the calls were fake!  But often, people on the phone exaggerate, I don't know why that happens in this business, it seems to attract people who promise and cannot deliver.  It's very weird.

We have enough cash on hand to buy them all, and rarely do people show up as they say they will, but on the off chance that our cash reserves run low, we are tempted to offer discounts on all our published prices.  So, tomorrow will be an excellent day to show up at the shop as a buyer, but of course, I cannot promise anything.  We make no futures contracts, and cannot promise any sellers will show up. 

So, what happened out there?  Any news out there against gold?  I really didn't see any.  But maybe I'm biased. 

I read the following today, that the CEO of Bank of America, Ken Lewis was caught between a rock and a hard place, and got squeezed out.  Thanks to Ted Butler for breaking this news to us on Tuesday:

TED BUTLER COMMENTARY
April 27, 2009
DANGEROUS PARALLELS
http://www.investmentrarities.com/04-27-09.html

Ted wrote:  "Basically, it was revealed that the Chairman of the Federal Reserve Ben Bernanke and former Treasury Secretary Hank Paulson strong-armed the CEO of Bank of America, Ken Lewis, to complete his bank’s acquisition of Merrill Lynch, after Lewis tried to back out due to unexpected deterioration at Merrill. "

Two days later, Bloomberg reports:

Bank of America Strips CEO Lewis of Chairman’s Job
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8Zmbuv21mH0&refer=home

" Bank of America Corp., the biggest U.S. bank by assets, stripped the title of chairman from Chief Executive Officer Kenneth Lewis after investors rebelled against management’s handling of the Merrill Lynch & Co. takeover."

Lewis was damned by the Fed if he didn't acquire Merrill, and was damned by shareholders because he did.

This is a small victory of the people (represented by B of A shareholders) over the Federal Reserve.  I've never seen that before in such an amazing way.

But B of A shareholders are not your "normal" people.  They are generally the banking insiders who you would think would be close to owning the Fed and running the government, as B of A is the nation's second largest bank as measured by the size of their derivatives.  

http://www.occ.treas.gov/ftp/deriv/dq207.pdf

Scroll to the end.  Bank of America has $27 trillion in derivatives, second to JP Morgan who has $72 trillion.

So this is like the snake eating itself. 

Or perhaps this is like the armies of Gideon turning on themselves after he had 300 men surround the camp of his enemies and light their torches and blow their horns!  See the Bible book of Judges, Chapters 6-7. 

Judges 7:22 When the three hundred trumpets sounded, the LORD caused the men throughout the camp to turn on each other with their swords."

Meanwhile, Patrick A. Heller gives a great summary of news stories this week in his article:

Why Didn't Gold Rise by $100?

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=6632

In my last report, I reported someone else quoting minting numbers for Gold Eagles.  I could not confirm their numbers, and I see slightly lower, and still record high numbers from the US Mint, here:

http://www.usmint.gov/mint_programs/american_eagles/index.cfm?action=sales&year=2009

The 2009 monthly totals are far higher than the average 2008 numbers, which began to soar in August, 2008.

As you can see, the US Mint has suspended minting all fractional ounces of gold so far in 2009, which is an indication they cannot keep up with demand.

2009 Gold Sales Totals
(in ounces / number of coins)
Month One
( oz. / #coins )
Half
( oz. / #coins )
Quarter
( oz. / #coins )
Tenth
( oz. / #coins )
Total
( oz. / #coins )
January 92,000
92,000
0
0
0
0
0
0
92,000
92,000
February 113,500
113,500
0
0
0
0
0
0
113,500
113,500
March 136,500
136,500
0
0
0
0
0
0
136,500
136,500
April 147,500
147,500
0
0
0
0
0
0
147,500
147,500
Total 489,500
489,500
0
0
0
0
0
0
489,500
489,500

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2008 Gold Sales Totals
(in ounces / number of coins)
Month One
( oz. / #coins )
Half
( oz. / #coins )
Quarter
( oz. / #coins )
Tenth
( oz. / #coins )
Total
( oz. / #coins )
January 22,500
22,500
2,000
4,000
0
0
1,500
15,000
26,000
41,500
February 24,000
24,000
500
1,000
1,000
4,000
2,000
20,000
27,500
49,000
March 45,000
45,000
2,500
5,000
1,500
6,000
1,000
10,000
50,000
66,000
April 45,000
45,000
1,000
2,000
500
2,000
1,000
10,000
47,500
59,000
May 30,500
30,500
500
1,000
0
0
0
0
31,000
31,500
June 13,000
13,000
1,000
2,000
500
2,000
1,000
10,000
15,500
27,000
July 47,500
47,500
500
1,000
1,000
4,000
1,000
10,000
50,000
62,500
August 80,000
80,000
2,500
5,000
1,500
6,000
2,000
20,000
86,000
111,000
September 91,000
91,000
7,500
15,000
4,500
18,000
10,000
100,000
113,000
224,000
October 104,500
104,500
7,000
14,000
4,000
16,000
6,000
60,000
121,500
194,500
November 115,000
115,000
0
0
0
0
1,500
15,000
116,500
130,000
December 176,000
176,000
0
0
0
0
0
0
176,000
176,000
Total 794,000
794,000
25,000
50,000
14,500
58,000
27,000
270,000
860,500
1,172,000

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The US Mint explains the shortages, here:

http://catalog.usmint.gov/webapp/wcs/stores/servlet/CategoryDisplay?catalogId=10001&storeId=10001&categoryId=13238&langId=-1&parent_category_rn=10191&top_category=10191

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

Oddly, it appears as if the US Mint has no plans to re-introduce fractional ounces of US Eagles.  So if you have any, you may wish to hold on to them, they may increase in value substantially.  On the other hand, perhpas now is the time to sell, if you can get substantial premiums for your fractionals, and put the proceeds into REAL fractionals, such as silver one ounce rounds that are a much better value!

Finally, here is the sales brochure on the American Eagle Coin from the US Mint:

http://www.usmint.gov/downloads/mint_programs/am_eagles/AmerEagleGold.pdf

Final thoughts.

It has been both easy and difficult for me to learn to trade bullion, and put theory into practice.  Many lessons have been learned in a short period of time, and I apologize if my prices have appeared to be unreasonable at times.  I'm getting better rapidly, aiming to do our best, and part of the learning curve is in finding better supply sources, including the public.

At first, last fall, I started selling only one product, silver bars, online, and buying nothing from the public, and looking for manufacturing sources only.  I knew that I needed to ration product by price, as that is the theory.  And, in theory, you should "never run out" since if you do, that does not help the market at all, and you put yourself out of business! 

In fact, I started selling 100 oz. silver bars when no national retailer had them for months, and when large manufacturers were backordered for 2 months and were refusing new orders!  So, to prevent running out, I rationed product by price, and by limited sales via the auctions at seekbullion.com.

And, I did well during that time, as I never ran out!  So, in one sense, I succeeded!  But early on, I sold out daily, so I HAD to severely ration product.  These days my maximum limit is still about 10,000 oz., but we are selling much less than that, about 1000 to 2000 oz. per day, and thus, there is no need to ration by auction any longer. 

But I have since learned that there are so many products in the bullion trade, that selling out of one form of product, while having other forms of the same type of bullion, is not "the end of the world" nor does it put you out of business.  In practice, too many limits on sales are the opposite of general free market principles, and I'm striving to find that best balance.

Today, I have decided to discontinue auctions at seekbullion.com until the market demand heats up again, and requires such limits and filters on public access to our inventory.  We will continue to sell at our shipping department nationwide via "buy it now" on the phone lines, and through our coin shop to our local area.

Taking the time to list auctions that don't sell is a waste of our time, and your time. 


Sincerely,

    Jason Hommel