Guns and Gold

Michael R. Fuljenz (2)Guns and Gold – By Mike Fuljenz –

The Long-Term Outlook for Gold Remains Positive – Don’t Get Caught up in the Short Term Moves –

During gold’s 12-year bull market, we have seen many corrections.  Gold’s advance is usually two steps up, one step back, but the long-term bull market remains intact because (1) federal spending is still out of control, with budget deficits over $1 trillion per year in the last five years and huge deficits projected for many years to come; (2) the Federal Reserve keeps printing new money, including $1 trillion per year in Quantitative Easing; (3) the World Gold Council reported that Central Banks continued to be significant buyers of gold in 2012; (4) other major currencies are also being devalued to gold; (5) new gold supplies are not growing rapidly enough to meet growing demand; and (6) interest rates need to remain relatively low, giving gold an “even playing field,” since rising rates would increase the service costs on the federal debt.

Recently, Barron’s featured a picture of President Obama under this headline: “Follow Me: We Can be Like Greece,” with a subhead, “If we follow President Obama’s plan, the U.S. in 25 years will be in worse shape than Greece is today.” The government’s worst problem involves entitlements, most notably Social Security and Medicare, plus interest on our huge and growing national debt.  The percentage of our population over age 65 (needing Social Security and Medicare) will grow from 15% now to over 20% by 2029. According to the Urban Institute, the average American working couple pays $114,000 in Medicare taxes during their working lifetimes, but in retirement then run up an average payout of $355,000 in Medicare benefits – over three times what they put in – and that $355,000 figure should keep rising as medical costs escalate.  In addition, interest rates on our rising national debt could eventually approach $1 trillion so that by 2029, entitlements and interest on the debt could absorb 100% of federal tax revenues.

Fair and Balanced Reporting on Gun Violence

While many in the press report on acts of gun violence, rarely have you ever heard a reporter give you the other side of the story – of how guns in the home can save lives, too.  The NRA magazine has a column called “Armed Citizen,” in which they summarize about 10 local news stories of people who protected their home, business or property in the latest month.  These families were protected from horrific criminal acts just because they were armed citizens.  So, the next time you hear a horrific, unfortunate story about gun violence, ask if that media source or politician is “fair and balanced” enough to present equal time to the positive use of guns to protect property and lives – especially the lives of those who are physically weaker, such as the elderly, women or defenseless children.

Here is one example from the NRA’s most recent “Armed Citizen” column:

“A mother of two was home with her children in Loganville, Ga. when she heard a repeated knocking at the door. Concerned, the mother called her husband, who told her to ‘get the kids and hide.’ The mother complied, retrieving a gun and taking her children to a crawlspace. By the time they were hidden, the criminal who had been knocking at the door had made it inside the house and was making his way towards the closet where the family was hiding. The home invader opened the crawlspace door, at which point the mother fired six shots from a .38-caliber revolver, striking the criminal five times. The mother kept the revolver trained on the home invader as he exited the house. Once outside, the criminal tried to flee in his vehicle, but only made it a short distance before he was captured by police. Walton County Sheriff Joe Chapman commented that ‘When you got five bullets in you, it makes you kind of disoriented.’ The proud husband praised his wife following the incident, stating, ‘My wife’s a hero… She protected her kids. She did what she was supposed to do.’”

– From the Atlanta Constitution, January 4, 2013.

Don’t bet on seeing these children at a White House press conference.

There is a wave of understandable outrage about crime in America, and in particular the tragic murders of school children in Newtown, Connecticut, but many Congressmen (and women) are currently recommending a series of knee-jerk reactions to specific events rather than a rational, well thought-out proposal for an all-encompassing response to the actual rate of gun violence in America.

For instance, the discussion of limiting rounds in our rifles is based on how many bullets it takes to down a deer, which is a caricature of the challenges many hunters face. What seems logical for a San Francisco-based Senator like Dianne Feinstein will not necessarily help property owners and hunters in Texas.  What our big-city gun control advocates may not know is that wild hogs are epidemic in Texas and other states, and they can be lethal in numbers.  They are very destructive and can be life threatening.  Would Senator Feinstein or Schumer feel comfortable being surrounded (or attacked) by a pack of feral hogs with only 7 rounds or less in their clip?  Millions of these destructive creatures are growing in number and roaming the southern U.S., particularly in Texas, and you don’t want to depend on a single-shot rifle when they attack.

Reasonable minds can reach a rational compromise that might also include smarter ratings on violent TV, movies, and video games. America must also address the mental health of those who may need institutional care. To focus on guns and gun registration alone is to politically ignore a wide array of possible contributing factors to any senseless act of violence.

10,000-fold Gains for One Coin!

On January 24, 2013, a 1794 Flowing Hair silver dollar graded Specimen-66 by PCGS brought over $10 million at auction, a new record. This made national news. In the late 1800’s, when coin collecting started to sweep the nation, these coins were called the “Dollars of our Daddies.”

The 1794 Flowing Hair dollar was sold in 1945 for $900.

Two years later, it sold for $1,250, so you would think the first buyer would be happy, but he gave up 10,000-fold gains by selling “too soon.” In the 67 years since 1945, the 1794 silver dollar has gained a total of 11,130-fold but that does not make any single year a guaranteed gain.  The person who bought this coin in 1984 for $264,000 made the mistake of selling it two years later for 21% less (at $209,000). The lesson is that it seldom pays to sell too soon. That’s why I typically recommend a five to ten year hold on rare coin and bullion investments. This 1794 dollar is another example of the value of holding historically important rare coins over a long time.

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8 years ago

Last year, President Obama suggested and agreed to sequestration to bind his promise to make required spending cuts . He ignored his promise, went on extended R&R around the country, and came up a day late and 85B dollars short. Now in “Chicago” style he has chosen to pony up in a vindictive way, calculated to hurt as many as loyal citizens as possible while emptying prisons, furloughing lower level civil employees, closing the “peoples house” to visitors, all while countless wasteful programs and useless sycophantic appointees continue to bleed our economy. Beware the Charismatic Leader and dont drink his “Kool Aid”, its bad for the health.

8 years ago

Your advice on gold has been spot-on based on statistical trends. I always laugh at the people who talk about the stock market and how they say they are doing good now but hit a rough patch here or there. WIth gold it is one commodity that you have to track and monitor. If you play the stock market youhave to worry about every companyyou are invested in. And some of those companies that seem to be “Too Big to Fail” can just go into bankruptcy, change their stock ticker (Delta Airlines) and screw people out of thousands or even millions of dollars. It would take an alchemist change gold. Oh wait, that might get into the realm of counterfeiting.
As always, great column.

Edgar Roupe
8 years ago

My latest investment in precious metal was in the form of a stainless steel Smith & Wesson.

8 years ago
Reply to  Edgar Roupe

Don’t forget to stock up on that non-precious metal lead and lots of it. Buy it by the case, if you can. After all, your Smith & Wesson would just be an expensive paperweight without it. :-)

Joe Burke
8 years ago

Feinstein IS comfortable surrounded by feral hogs…they are called senators and congressmen.

8 years ago

An individual’s investment portfolio that includes precious metals is fine. A society seeking to invest in precious metals sends a signal of fear and caution -that all is not well with the social and fiscal make-up of that society. I have seen many a story like this one in various publications. I do not have 67 years to earn a 11 kagillion times return on my investment. I’d be happy with the inflation rate+risk+compensation for postponing consumption today -say a rate of 7-10%. I must say its slim pickings. Maybe next time I’ll see alternative investments suggestions.
I think the sequester will turn out to be a good thing for us. As pointed out elsewhere, the word means to separate, isolate (hence the metaphors of meat cleavers vs scalpel among the talking heads) . Our chief executive was expected to identify spending that could/should be trimmed (not ‘cuts’ as the plan only calls for a decrease in the rate of growth, not the elimination of the line item). He did not. Instead he chose to trim exactly those functions that we created government to perform for the common good – police, firefighters and defense, Releasing criminals?. I find it ironic that our chief executive has chosen to inflict this kind of harm on us all – probably a first in the history of democracy. If voters realize this then In 2014, the strongest message they can send our politicians would be to vote out the incumbents, preferable during the primaries.

8 years ago

“Gold’s advance is usually two steps up, one step back”? You could just as well (& perhaps better say): “The dollar’s decline in value vs gold is usually two steps down, one step up.”

As to the .38 gun story, the moral of the story is:
YOU ARE A LAMEBRAIN IF YOU USE A .38 FOR HOME DEFENSE! For crying out loud, 5 hits would not stop the criminal? Better get a .357 Magnum, preferably a Rhino that shoots out the bottom for no muzzle flip.

Jim R
8 years ago

I hope to see more reprints from the NRA magazine offering real stories from the other side of gun control!
Robert’s comment is spot on.

Adam Lee Terrell
8 years ago

Great insightful article. Concerning guns: I was told that Obama’s kids go to a school with armed guards. And, it is interesting to know, in Israel, all the teachers are armed and during class outings there are additional armed assistants. They have zero problems with student safety there. Maybe we could learn something from them.

Robert Sweeney
8 years ago

The real problem with “gun control” measures such as Sen. Feinstein’s is that the Second Amendment has nothing to do with hunting, whether deer or pigs; it’s about the citizens (which comprise the “militia”) protecting themselves from being exploited by a tyrannical government. In the Founding Fathers’ day there would have been no need for an amendment to the Constitution protecting the right to hunt because no one would have questioned a man’s right to feed himself and his family. However, there are some who question the right of a people to govern themselves.

8 years ago
Reply to  Robert Sweeney

The Senator is just looking for a way to justify confiscation of guns. Don’t over-think it.

8 years ago

Your article was fine until you jumped the shark with reference to the 1794 Flowing Hair silver dollar. Are you trying to imply to the average person that they can expect that kind of return on coins they could be investing in now? You omitted that the reason the 1794 coin fetched such a high price was both its extreme rarity and condition. The kind of coins the average person is likely to able to invest in today are not going to appreciate in value anywhere near what this particular coin did.

While it is laudable to try to build interest in both precious metal investment and precious metal and investment grade coins, since both are likely to appreciate quite well over time, you should try to give more reasonable examples of price appreciation the average long-term investor in likely to experience.

8 years ago
Reply to  PaulE

I believe in investing in precious metals. Investing in particular rare coins is a lot like playing the lottery.

8 years ago
Reply to  Poppo

I’ve been investing in coins for over 50 years. Like anything else, you have to do extensive research, understand the market fundamentals and deal with reputable dealers. Investing in coins is NOT something you get into by watching an ad on TV or seeing a flyer in the mail. That’s how you’ll get burned every time.

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