The Cost of Money

Since the inception of money, many items have been used as currency, from salt to animal hides, as well as assorted other things such as precious gems. No matter what though, gold and silver have been accepted as legal tender throughout the ages. Even Judas Iscariot received his thirty pieces of silver for betraying Jesus, only to try and return it to no avail. He threw it in a field and it became a burial ground for paupers.

The year 2012 saw gold hit all time highs, retreat moderately, and kiss the highs again. Silver was a clear winner when it hit $60 an ounce for the first time since the Hunt Brothers tried to corner the market in silver.

Though most analysts and technical traders are hawking gold, due to the impending global economic collapse, the National Inflation Association named silver as the “Investment of the Decade.” Since it is much lower priced than gold and has more of an upside potential percent-wise, it makes sense to buy more bang for one’s buck. One can purchase run-of-the-mill Morgan silver dollars for a small amount above spot silver price; however, 2005 and 2007 uncirculated with certain mint markings are worth much more than a small amount over spot silver. Also, 1921 Morgan silver dollars with the correct mint mark that have been circulated can be worth $175 or higher. One thing to remember, however, is that in times of crisis, you are often trading only on the value of the silver in the coins, not the rarity. While they may be valuable to a collector, specialty coins may not see the same investment return during a market crash compared to plain-Jane silver dollars.

As for my own collection, I do own an 1886 silver dollar that is more valuable than most. Yes, I do own some gold coins as well, but very few. I acquired them in the mid 1970s when gold was not nearly what is it now. It was trading to the buyer at $794.70 an ounce. There was a run-up later that caught many off guard when the entire gold market sold off without warning to the everyday investor. Spot silver was trading at $5.50 an ounce (for the 500-ounce contract) at the same time—quite a spread in the prices.

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Most precious metals analysts and experts expect to see gold, silver, and platinum hit the stratosphere this year (Bill Gross, Bill Rogers, Warren Buffett, and El Erian, just to name a few). While the ins and outs of gold and silver cannot be explained in one simple column, it would be beneficial to do your own research and learn how to understand the workings of precious metals. You will not be sorry. In the meantime, try to purchase a Morgan silver dollar or two from a reputable coin dealer (I use Blanchard Gold Coins with offices nationwide). It will not take a chunk out of any one check, and it will be an investment you can trust in.

In other news, 2013 is shaping up to be a very tumultuous year financially. The United States is being threatened with another credit downgrade due to our fiscal problems, as we do not have the runaway spending addressed in a meaningful manner. The “bipartisan compromise” was neither bipartisan nor a compromise. For every $1 saved, there was an additional $41 in taxes created.

Regarding cost savings, the federal government has finally decided to cease minting pennies and nickels. It costs one and a half cents to mint one-cent pennies, so I do not know what has taken them so long to decide to desist in this guaranteed-loss action. Nickels are biting the dust also.

As I’ve said, expect 2013 to be a year of ups and downs in the financial market. Congress is too spineless and the White House is too clueless to make any significant dent in our budget problems. It’ll be up to each of us individually to secure our financial health as best we can through conventional and non-conventional means. Remember the Boy Scout motto—always be prepared!

Editor’s note: Mary’s financial column is featured the second Friday of each month. Check back next month for more thoughts and tips from our leading financial adviser.