The Rosen Numismatic Advisory intervew: Richard Maybury

WHO IS RICHARD MAYBURY AND WHY SHOULD WE CARE? I don't blame you for asking. He is not among the first-string, star hard-money commentators. Yet, when you read what he has written, and hear his talks (on his website, richardmaybury.com and on youtube.com), you quickly realize here is a person to be listened to.

He is widely regarded as one of the top freemarket writers in America. His articles have appeared in the Wall St. Journal, USA Today and other publications. In his newsletter, Early Warning Report, he stresses geo-politics and economics. He has written 22 books and monographs and has been interviewed on more than 250 radio and TV shows across America, on topics ranging from monetary policy, investments and business cycles, to the geopolitics of the Mideast oil region and former Soviet Union, as well as U.S. foreign policy.

Mr. Maybury sent me a packet of back issues of EWR which I found fascinating reading. He has a broad understanding of economic, social and political issues, is a libertarian (favoring minimum government), is guided by two laws: 1) Do all you have agreed to do, and 2) Do not encroach on other persons or their property, and counts U.S. Congressman Ron Paul as an avid reader.

What intrigued me to first contact Mr. Maybury for an interview is a comment he made when interviewed by another publication. He foresees massive inflation, $3,000+ gold and $50+ silver in as few as 2 years from now —nothing so unusual about those predictions within hard-money circles— but here's what he said that drew my attention: however high the gold price goes, rare coin prices will go 5-times higher! So, if gold triples, rare coins will go up by 15-times! If gold goes up by a factor of 10 (which he writes is very possible), the inference is that rare coin prices will soar by a factor of 50!

Actually, he stresses it's not that those prices will rise but that the value of the dollar will fall. Anyway you look at it, that was a prediction that I couldn't resist ignoring.

After you read the interview that follows here, go to his website. There you will be able to read for free: a sample issue of his newsletter; special free bulletins; various interviews and speeches, including his latest, "The impoverishment of the young;" and what he calls the Chaostan model (the land of Great Chaos).

MR: Richard, I'd like to begin the interview with your often-stated prediction that while you foresee the price of gold going to at least $3,000+ over the next 2 to 3 years, you see rare coin prices going up 5-times as much as bullion! What is the basis for your forecast?

RM: Those predictions are based more on the value of the dollar declining drastically than precious metal and rare coin prices rising. I view the value of the dollar as severely vulnerable to a plunge that will have enormous ramifications for all markets, especially non-dollar denominated assets of which the precious metals and rare coins will be prime beneficiaries. There is a high probability of a devaluation of the dollar, perhaps a series of devaluations. So, based on the runaway inflation I see coming and the strong possibility of dollar devaluations, I am highly confident that gold will see $3,000+ and silver $50+. They could go to multiples of those prices.

Specific to rare coins, one of the items that people run to in a monetary crisis is raw materials. My point is that rare coins are the rarest form of raw materials. At some point they will become, hot, fashionable investments. As the ordinary person learns that his currency is declining rapidly in value, he will run to buy other things. One of the things he will discover is numismatics. We saw this occur in the 1970's. Many folks who knew nothing about inflation, gold or rare coins were looking for ways to diversify away from the dollar and were attracted to numismatics. Precious metals will definitely become fashionable to own but numismatics will become the hottest of all the hard-asset investments because they are the rarest form.

MR: I admit a massive replaying of the 1970's sounds tantalizing to rare coin investors, but explain why that since the lows of 2001, gold has almost quadrupled while rare coin prices, on average, are up less than 50% —and that doesn't include dealer profit margins? If they didn't perform so wellthen, why should they do so much better in the future?

RM: The average person doesn't understand or even think about the impending serious economic and monetary problems facing the country. Right now, it's far from reality for 99% of the population. They haven't discovered gold and silver bullion coins, much less rare coins. In time, this will come. It will impact all non-dollar denominated assets, all art, antiques, collectibles, vintage cars, precious stones, you name it, but most particularly rare coins. The most extreme example I can cite is what has been happening in Zimbabwe. The most informed citizens made early preparations and fled from their paper assets into tangibles and foreign currencies. It took time for that to filter down to the masses but in short order it did and caused panic conditions.

MR: You've written often that rare coin prices will outperform precious metal prices by 500%. How did you arrive at that stunning projection and which rare coins do you like?

RM: It's just a guess, and I have the suspicion it's a rather low guess at that. The quantity of bullion in existence is so much larger than that for numismatics. It doesn't take a big influx of money into your market to drive prices way up. At some point they will become the new tulip bulbs! I think it's wise to buy all across the spectrum because you never know what the public is going to favor. I'm sure you, Maurice, can zero in on specific high-potential areas with the knowledge I don't have. I'm sure there are many people with large net worths who will seek the rarest coins while the general public will buy the more available sectors of your market. Certified coins are, of course, the way to go for most purchases. Lastly, understand that rare coins are a speculation and should represent a minor portion of one's holdings. It's a highly specialized market, filled with a lot of risk to balance out the enormously high potential I see coming.

MR: Let's get to the heart of this Great Calamity you write with 95% certainty is here that will produce global runaway inflation, if not hyperinflation, and worldwide violence.

RM: We are facing three to five more years of extreme turmoil, then a revolution, followed by the greatest golden age the world has ever known. The whole scenario will take some five to ten years to play out, leading to a camelot age with America returning to its roots, with a gold standard backing the currency giving the people a coherent, logical system in which they can have faith. In short, the government is overplaying its hand and there will be an extreme public backlash. For sure, it's a time to realign your assets to take advantage of opportunities but you should also take precautions to protect those assets and your loved ones.

MR: Are you talking of a survivalist's life of guns and dry-foods while the cities burn?

RM: I wouldn't put it quite so bluntly but as economic conditions go from bad to worse, segments of the population will revolt out of fear and necessity. It's a most unfortunate situation, but it has happened many times in our history. All I'm suggesting is that people prepare for such conditions, maintain a low profile, have their assets secured and be able to protect themselves from danger. Your last advisory, Maurice, was on the merits of having a high-security home safe, so it seems you're preparing your readers for uncertain and tough times, too. Think of Hurricane Katrina. Life is full of catastrophes. All I'm saying is that while we prepare our investments for the future we must not lose sight of the volatile changes that could affect our daily lives.

MR: I worry that the government will be coming down on those who are benefitting while the masses are suffering, such as gold hoarders. You wrote the term, "Get the rich." Excess profit and transaction taxes imposed, talk of confiscation. Any thoughts here, Richard?

RM: I think there is a high probability of all those things happening. A study of history shows that when a nation gets itself into the kind of mess we are in all hell breaks loose. That doesn't make it a certainty but I'm planning my affairs accordingly. Gold going to $3,000, $5,000, $10,000 or wherever will be symptomatic of chaotic conditions. To believe otherwise is, I maintain, far more foolish than the foolishness some people may regard of me for holding to my views. I will emphasize that it is also foolish to try to predict exactly what politicians will do, either during relatively calm times and especially during unsettling times. We both make forecasts and predictions, yes, but I always advise my subscribers to be well diversified. Looking to hit home runs is not the way to run your finances or provide for your family's security. When I get a better idea of how Washington will b& reacting to the Great Calamity I can revise my forecasts.

MR: You write about the velocity of the money supply. What is that and why is it so important?

RM: Velocity is the rate at which money turns over, the speed in which money changes hands. If there is a big demand for money, as there is now, and there is confidence in the monetary system, as still exists in the public's mind, velocity remains low. People hang on to their money, neither spend or borrow, therefore exerting low volatility on turnover. If they don't trust the money, or otherwise don't want to hoard it, they'll look to get rid of it; money demand is low, velocity high.

I see three stages to velocity. In stage-1, there is stability, people trust the currency, it's easy to plan ahead. In stage-2, people are getting nervous about holding money, beginning to trade it for other things. In stage-3, they are in a panic to trade the currency for anything; think Zimbabwe, or Weimer Germany in the early 1920's. I see us now in the middle of stage-1. For a brief period in 2007/08, we were very close to stage-2; that's when gold went over$1,000, raw material prices went up, the value of the dollar fell, and there was a run-up in rare coin prices as well. Then the real estate meltdown took hold, stock prices dropped, and people fled to the dollar with the belief that "cash is king." Velocity collapsed, giving rise to a deflationary outlook. It's for sure that Washington wants velocity to turn up so the economy improves. They want money pumping through the system, not just sitting in bank accounts or stuffed in mattresses.

The trick for them will be to control those velocity upticks so they don't get out-of-hand, something they keep reassuring us they'll be able to do but which I seriously doubt they can. So, you can view velocity in its broadest and most extreme terms as a process from heavy money demand: hoarding, to little demand for currency: the Zimbabwe/Weimer Germany wheelbarrow scenario.

MR: Is there some event that would turn velocity quickly up over the next few months?

RM: One such event would be if Saudi Arabia, China and Russia suddenly announced they would not accept dollars for their exports. That would cause an immediate shot-put effect of driving up velocity, driving down the dollar and causing a rush to non-dollar assets. Of course, this is conjecture, and at first read sounds farfetched. But you must comprehend the extreme weakened condition of the dollar, how tenuously its hold has been maintained by politicians and they're failed policies. If it's not the event I just told you, it will be another, yet the end result will be the same: a much weaker dollar and a run-up in the prices of non-dollar denominated assets.

MR: Are there any signposts along the way that will suggest such an event is in the making?

RM: We were talking earlier about dollar devaluation. I see that as a high probability, in fact more than one devaluation. There is a classic sign to watch for concerning an impending currency devaluation. Just watch for when the politicians deny that there is going to be one! Right now, there's no talk of devaluation at all; it's not in the press, the public is not talking about it, most people don't even understand it. I'm watching for when the word devaluation actually begins to get into the press. That will be, for me, the first alarm signal. As the denials increase, so does the probability of a devaluation. Hundreds of years of monetary history prove this to be a good signal.

MR: Any closing comment for my readers?

RM: We are presently going towards a Zimbabwe situation. We're far away from it now but that's what we're set up for. At some point, when the population panics to get out of the U.S. dollar then there will be a spike in the value of precious metals and numismatics. How high can prices go? The sky is the limit. Understand that the quantities available are very small compared to the volume of paper assets. One good trade during that spike would be coins for land. Pick a great vacation or retirement spot that you like and secure that piece of real estate. Just as we have had financial bubbles in the past, there will be precious metals and rare coin bubbles. Be prudent, diversify, take profits on the way up, cultivate cowardice. Psychologically prepare yourself to bail out early and leave some money on the table. It s better to bolt for the exit a year too early than a day too late. During the tumultuous times I see ahead, civil unrest will be a major concern. Take precautions for the safety of your property and your family. Remember, after this period I call the Great Calamity is over, there will be a new era of peace, liberty and abundance. Let's all get through the chaos in fine shape so that we can enjoy the good times that will come after.

Summation:: Is Richard Maybury any different than any number of other Chicken Littles we've heard or read about in these pages or elsewhere? For over three decades they've been carrying the sign, "Hyperinflation is coming! Prepare now!" True, during those 30-odd years there have been brief periods when inflation flared up and it looked like we were going to need those wheelbarrows to lug our cash, but in short order calm was restored. Deficits and debts zoomed higher, money was created out of nothing, yet we still are far from falling off the cliff. Drop a buck on the street and see how long it takes for someone to dash over and pick it up. Why worry now?

Maybe it's a hard-money believer's fate to always worry until that glorious day comes when we have an honest currency backed in some fashion by gold, when politicians spend the public's money wisely, and when we are truly free to enjoy life, liberty and the pursuit of happiness. That aside, the facts and figures before us today are so awesomely mountainous compared to any previous time that it's difficult for many of us to feel other than cocksure that "this is the time."

Maybury says he is 95% sure this is the time. He is looking for his closely-watched velocity of money to turn up by the end of this year triggering runaway inflation in 2010 and, possibly, what he calls vengeance riots as an angry public revolts against an "unjust" system. I'm not prepared to agree to all of that but it's curious that in the last RNA I hinted at such a situation in my article on home safes. There's nothing wrong with being prepared, diversifying your holdings, and having the means to defend your home and family. That's prudent living and taking practical insurance measures. Now, what about his prediction that while the prices of gold and silver may rise 1000% in real (after-inflation) terms, rare coins will perform 500% better —meaning a 5,000% real gain!?

He doesn't sell coins, rare, bullion or otherwise. In his newsletter he refers inquiries to a couple firms, specifically stating that he receives no kickbacks, commissions or fees of any kind. Now, you know that I have established myself as a maverick in the coin business as far back as the 1970's by debunking the myth of Historical Price Performance Data. Simply put, those fancy studies made no mention of grading changes, various dealer profit margins and market liquidity problems. You can't buy from or sell to the Greysheet or Trends. The way you measure performance is by money in versus money out. For most non-knowledgeable folks buying coins from large retail dealerships, they're probably lucky to wind up with 50-700 worth of Net Liquidation Value for every $1 they first put into coins. My mantra to you has always been to Make Sure You're Getting Your Money's Worth, which I define as getting at least 800 on the $1.

All that being said, I agree with Maybury that when (and I should add: if) the inflation panic hits, rare coins will become a hot area. It will because the marketing machinery of the industry will swing into full unbridled motion, unleashing radio and TV commercials, direct mailings, tie-ins with newsletter publishers (other than Maybury's) and the staging of various, massive promotions —essentially the same game plan as they've successfully employed in the past.

That's why I agree with Maybury that rare coins have the potential to do much better than gold and silver, but 500% better? I'll leave that for the final tally, but I'll be ecstatic if they return "merely twice" the net return of precious metals. Knowing when to visit the cashier's window will be vital. While I won't presume to have a clear fix on when the hyperinflation panic will turn (assuming it happens in the first place), or when gold and silver prices will top out, I should have a much better read on when rare coins will be in their final bull cycle. I've lived through six of those tops since I've been involved with coins. I'll be on guard to call the Top this seventh time.

Why is there so much "slop" in the market? One thing that's bothered me for a long time about the market is the proliferation of off-graded slabbed coins I see. People in the trade call those slabbed coins a variety of uncomplimentary names, such as: dreck, slop, sludge or stuff. Whether I see them at shows, auctions, in dealer inventories or in the portfolios and collections of collectors and investors, these low-end and overgraded coins have advanced from a nuisance level to a pandemic, especially noticeable and annoying during the current slow market cycle.
I've written numerous times about a regrading recall of all slabbed coins to meet current (stricter) standards, allowing about a year for the process to be completed. The ramifications would be huge, earth-shattering for some, but in the long run a great service for the industry. If anyone else wants to propose a "cleansing" plan for poorly-graded slabbed coins I am willing to listen.

The reason why there's so much slop around is simple: the nice coins are the first to be sold and squirrelled away. It's as if you went to the supermarket too late to buy fresh fruit on sale and only had the well picked-over fruit to select. You'd have to wade through a lot of passed-over fruit to find what you'd want to bring home. So it has been in the coin market. That's why "fresh deals" of coins are so attractive; it's like a fresh delivery from the farm.

What makes this so bad is volume is suffering. Many dealers have want lists and client requests that can't be filled because the coins that are available aren't good enough. Eventually some get sold but that's because price shoppers get unknowingly trapped or questionable marketers who look for bargains because their unknowledgeable customers won't object to what they buy.

The grading services are reportedly buying back some of the more atrocious errors but they could never tackle the problem in its entirety. Why? They don't have nearly enough money. It would take many multiples of their capital to make a big enough dent, so forget about them cleansing the market on their own. If we had a more effective lobby in Washington, maybe we would qualify for a slabbed-coin bailout. Considering the trillions that are being spent there, one measly billion should easily do the trick for us. Anyone for recommending me to the President as Coin Czar?

Is it too late to unload your slop? I've been telling you to do this for years. If you haven't weaned your portfolio of the stuff, you'll probably have to endure big discounts in today's market. Should you? Grit your teeth and do it. There's never a good time to own those coins, so anytime is the right time to unload them, assuming you can reapply the proceeds in better value material and not lose too much due to transaction costs. Work closely with a trusted dealer(s) to help you trade out of your sub-par coins and to replace them with better material.
Understand that in the bull market to come, if Richard Maybury is even half right about the performance of rare coins versus precious metals (out-performance by 250%, not 500%), it's for sure that the bigger gains will be made by the superior coins. Newsletter writer Howard Ruff (whom I intereviewed here) is credited with saying that if the wind is strong enough, even turkeys will fly. Same thing with those sub-par, off-quality coins. Fly they might, but not very high.

The Bottom-Line: All coins are not always great investments. Timing, selection and price are critical elements. The comparatively few coins that most pros would agree are great and available today are a sprinkling compared to the ocean of coins that aren't. You want the great ones. Since there are so many more non-great coins around, but a set volume of business that dealers need to do, they are forced to dip into that ocean to satisfy their sales. Your job is to learn what a great coin is and to associate yourself with sources who can deliver the goods. If you can not satisfy yourself that you're doing your job, don't invest in rare coins. Buy as a collector if you choose, but understand that you can not easily overcome the obstacles to getting your money's worth.

Reader feedback on my cautious comments on American Gold Eagle Proofs Some readers took issue with my recommendation in the last RNA to sell some of your AGE proofs and put the proceeds into the regular uncirculated AGE'S. I felt the premium on the proofs (referring to the 1-oz. coins) was high, subject to too much speculation and, importantly, in the long run, when the gold price is much higher, would see its premium over melt likely dwindle.

One reader felt the government would look more favorably on the proofs because the coins originated from the U.S. Mint and were sold as collector coins, not to hoarders as would be more readily interpreted for the non-proof AGE's. This reader is making the assumption that the government will be far more reasonable than I think they would be if economic/social conditions got to an extreme. History has taught us that any government will take extreme measures if they have to. As I wrote in a recent RNA, when the stormtroopers come marching in and discover you have a stash of "allowable" gold coins, don't count on them leaving the coins behind with you.

In a far less extreme situation, think 1980 when silver was $50+ and all things silver were thrown into the melting pot, including BU silver dollars, proof silver coins, Seated and Barber coinage.. Coins that once had big premiums to melt saw those premiums disappear. Interestingly, no reader countered with an argument calling for premiums to rise greatly in the future, what I would love to hear as a reason for retaining, if not increasing, one's position. All they did was refute my thinking that, given my assumptions, the premium risk was to the downside.

Bottom-line: Having AGE proofs as the sole basis for your precious metal holdings is imprudent. Owning some as a collection is okay, but for strict investment/speculation/protection, stay with low-premium bullion items. Everything has a price. When those 1-oz. AGEs were melt plus $100 or so, they were a good deal, but at melt plus $500 they carried too much fluff and risk with not enough premium expansion potential remaining. The test will come when and if gold gets to the multi-$1,000 prices some folks foresee. If I'm wrong and the AGE proof premiums don't cave in, I don't think you'll be too sore if you "only" have the non-proof AGE's socked away.

How's the market, and what can we expect from this year's ANA? This is a savvy buyer's market dream. While the press is filled with stories of depression, unemployment, crushing tax burdens and housing woes, folks with the bucks, the guts and the brains are having a field day picking up great coins at sensible prices. It's almost a Warren Buffet-type coin market!

Market Premium Factors have come down, making it easier to get more coin for your money. Clearly, if off-grade slabbed coins are going for 20-30-40-50% discounts from bid levels, you can get the real-deal coins for much closer to full bid than if the market was sizzling hot. That doesn't mean you or I can pay bid, or even close to it, for eye-popping quality coins, but the clamor for them is at a somewhat more restrained level. This will change, of course, as the overall market improves, as people make their mind up that the market has stopped going down and as new investor demand flushes buying power through the system. It's a repetitive process, as night follows day and as a strong market follows a weak one. Count on it happening again.

Market Sector Run-down:

• Best Buys continue to be Type with great eye-appeal, especially silver Bust material, and select Liberty Seated and Barber issues.
• Early Bust gold, a favorite of the more affluent buyer, is easier to buy than it was a year or two ago but off-quality pieces still dominate offerings.
• Nice Proof Gold pieces are occasionally available and are great buys; they are among the easiest coins to market to affluent investors.
• Although you wouldn't know it from sheet prices, U.S. Commemoratives are moving into strong hands; they have little downside risk form here.
• Premium Early Copper continues to have a large collector following; investors should generally avoid those coins unless they have specialized knowledge and are otherwise well diversified.
• Silver Dollars are weighed down by tons of slop, though the occasional premium piece can be a good buy. Carson City issues are the most appealing to investors.

"A few great coins" You've read these words here many times before. They refer to my advice that your investment portfolio should consist of a handful of great coins, not a compilation of this and that, all-over-the-map-type holdings. If you owned 5-10 outstanding pieces you would have the makings of a winning ticket in the coming bull market. While what's actually available in the market at any given time (ANA Convention or otherwise) can't be anticipated, here's a baker's-dozen random sampling of some winners previously recommended here (with CDN bids).

Type-1 $20 Liberty Gold Pieces Congrats to subscribers and clients who took my advice when buying circ. Twenties to give preference to the early Type-1 Liberties (dated 1850-1866). They're showing the dividends I anticipated. Going for a premium of from zero to maybe $20 extra, they now command an $80 premium in EF, and from $95 to $200 for AU's! This has also affected the Type-2's (1866-1876), with premiums developing of $10 in EF upwards of $190 for AU's. Don't consciously pay these premiums now, but if you're in the market to pick up some circ. Twenties, be on the look out for these earlier dates. You might catch a dealer sleeping as you look through tubes or boxes of randomly offered, mixed-date pieces.

How safe are cheap safes? Some folks reading the last RNA about buying a home safe asked me about safes priced in the $300-$1,000 area. Like anything, you get what you pay for. Those safes may detract some casual thieves, but thieves with basic safe-cracking tools can bust them open in as little as a few minutes, or, since it's not too heavy, simply take the safe out of your house to a place where they can spend the time to pry it open. Think minimum TL-15 rating, with a burglar alarm, monitoring service and good locks. Expect the best, be prepared for the worst.