has been a precious metals dealer for nearly 50 years and knows
what gold bubble mania looks like. We are nowhere near that stage,
in his opinion.
sees a US populace largely unappreciative of holding precious metal
as a store of wealth, and engaged in a slow process of dis-hording
their gold and silver to eager foreign buyers, who are more than
happy to take the bullion back to their shores.
In terms of
where we are on the gold mania spectrum, he sees us at a "2"
out of 10.
But he foresees
a very rude awakening ahead, as the populace eventually wakes up
to the increasing damage that our over-debted global economy is
doing to the purchasing power of world currencies. Because when
the general investor finally realizes the protection the precious
metals offer against currency debasement, much of the retail supply
will already be out of the system, in very tight hands and largely
supply gets tight, there will be more challenges to obtaining physical
bullion during a buying mania than there were during the last mania
in 1980. There are many fewer local sources to exchange bullion
these days, as much of that business is now transacted by online
vendors dependent mail delivery to ship product, and they are more
vulnerable to supply chain disruptions.
Be sure you're
aware of how the form in which you hold your bullion will affect
the price you get during a buying frenzy, when refining capacity
is overwhelmed. You may find that your gold or silver sells at a
hefty discount because it's not in a preferred format for trade.
a True Gold Mania Looks Like
The phone calls
were ringing so much we could not answer them. We had to just put
all our lines on hold so we could service the customers, and we
wanted to service our own customers first.
We would come
in to open at nine in the morning and there would already be a line
out the door and down the block. Sometimes the line was mostly buyers;
sometimes there were sellers. We would run out of metal. We would
run out of anything. And we would have to divide the line
into two lines. We would take the sellers in first, get some product,
and sort it before the buyers were let in.
were not very discriminating then; they were panicking. By the time
it peaked in January 1980, there were people out there who did not
even understand free market economics or precious metal economics;
they were just buying because it was fashionable or because it was
going up forever. Those are more the makings of a bubble; today
most people are coming in to sell.
seller today is really the opposite of who they were 30, 40, 50
years ago. People used to save, either through a bank account, or
keeping some coins around, putting away silver dollars when they
came back from Reno or Lake Tahoe. They would be buying some interesting
furniture or jewelry and then they had income in excess of their
expenses. Today, so many households are stressed having expenses
greater than their income or servicing a lot of debt that they are
starting to sell the things, the heirlooms, that they so prized
before. So we are seeing people sell their Rolex they do not want
anymore or cannot afford to keep, their old jewelry, their parents
jewelry, and belongings that they inherited. The coins they collected
when they were a kid. it is sad, in a way, because what we are
seeing is the dis-hoarding of a culture.
Well, in the
United States, the typical buyer is perhaps someone who has taken
Course and has studied what is happening to our nation
and understands that they have to protect themselves from the coming
inflation and social ramifications of that inflation and the debt
burdened economy. Big money is buying, but for every one buyer,
there has got to be five sellers here, and I am sure that is
similar among my colleagues around the country, maybe even more
so. Because over here we are in a wealthier area, and I still have
more sellers than buyers.
A lot of
it is going overseas. A lot of the coins that came to America
over the decades, over the generations, either through the fact
that we had the money to buy them or through immigration or through
the spoils of war, it is all going back now to the home countries.
Especially if it is a home country, where their economies are rising
and the people are saving rather than spending.
night we had two visitors from China, colleagues of mine in Shanghai,
they flew here just to see me, and they flew back the next morning.
They cannot get enough coins in China; they are buying everything
back that came here when the people in China could not buy their
own coins. Next weekend I have more visitors coming. Coin shows,
which have been all over America, are now appearing all over the
world. There are now major coin shows in gathering marts in Singapore,
Tokyo, Beijing, Hong Kong. It used to be once a year; now it is
three, four times a year. Big auctions that used to be held in the
United States are now organizing in Hong Kong and other countries.
So we are
seeing a movement back in the opposite direction, and it is sad
[for the US market]
On the Importance
of Physical Form
So you mentioned refinery problems. What is a refinery problem?
Mish: A refinery problem is where a dealer buys the scrap gold
and the scrap silver and his refiner cannot get it processed for
several weeks or months. And that squeezes his cash flow so he has
to pay less and less to the public.
So if I walk in with a bag of junk silver, it is 90% silver,
it has always been trading well. But if we are in a real heyday,
your refiner says, "I am backed up 11 weeks. I can take that
in 11 weeks." Meanwhile, prices are gyrating. You are going
to look at me and say what?
Mish: I am going to say, "Mr. Martenson, I wish you had
come in here with pure tradable silver or something that is exchange-ready."
determines the choice for medium of exchange. If you have silver
in any other form, if it is in odd form such as coins, broken spoons,
and knives, or whatever, and I have to have it refined in order
to get it back in a marketable form, it is going to suffer a discount.
And that discount is going to be greater the longer it takes to
turn that around.
So anything that has to cycle through a refinery has that refinery
risk. What was the discount that got applied at its most maximum
in the 1980s?
Mish: In the 1980s, when we were about eight weeks backlogged
and not everyone even had a refiner relationship and [thus] had
to rely on other dealers who did, it got to about a 30% discount
for having the wrong form of silver versus the right form.
Click the play
button below to listen to Chris' interview with Robert Mish (runtime