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Doug Eberhardt
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Doug Eberhardt is the author of "Buy Gold and Silver Safely" and a broker/dealer selling gold and silver coins and bars at 1% over wholesale cost.
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  • On and On…The Fed Keeps On Failing

    This will be the last article I write for Seeking Alpha since they have changed their policy in allowing me to write about gold as a viable investment. They would not post this article below even though I adhered to their policy of including an actionable investment; gold. So I am relgated to posting it as an instablog.

    They compared gold to "wine, stamps, rare coins and baseball cards."

    One has to laugh at the disrespect gold gets from everyone, yet gold has and will continue having the last laugh at their ignorance. There is a reason why gold is higher in price every year for the last 10 years, going on 11.

    You can continue to read my articles at http://buygoldandsilversafely.com/blog

    Goodbye and good luck...

    Doug Eberhardt

    On and On…The Fed Keeps On Failing

    Whether it's Bernanke and Geithner, today or Greenspan and Snow of years past, the Fed will always do what they do best, interfere in the markets. But how effective are they?

    The Federal Reserves mandates are "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." This is a directive to the Fed by Congress as part of the Federal Reserve Act of 1913 and further clarified by an amendment to the Federal Reserve Act in 1977.

    But there was a third mandate that came out of the "Dodd-Frank Wall Street Reform and Consumer Protection Act’’ signed into law July 20, 2010 by President Obama.

    Dodd-Frank instituted a third official mandate for the Fed, empowering it to regulate systemic risk and preserve financial stability. The Fed is now required to present its findings on risky, non-bank financial firms to the Financial Stability Oversight Council, which instructs the Fed on how to sanction those institutions.

    FED MANDATE FACT CHECK

    How Has the Fed Done With the Mandate of Sustainable Unemployment?

    Fed Governor Frederic S. Miskin gave a speech in April of 2007 called Monetary Policy and the Dual Mandate.

    The best way to achieve the mandate is for the Federal Reserve to have a strong commitment to a nominal anchor to promote price stability, but with a focus on keeping employment as close as possible to its maximum sustainable level.

    It is clear to anyone that the Fed has failed the mandate of maximum sustainable employment. The government statistic has the unemployment rate today at 9.1% while if the unemployed who are no longer actively looking for work were actually counted in that statistic, we are well into the mid teens for the real number of unemployed.

    Does the chart below look like sustainable unemployment to you? Even according to the National Association for Business Economics (NABE), the recession ended in 2009, something I told readers not to believe. Bernanke and the Fed were claiming the recession was over even a month earlier. You can recall CNBC commentators at the time talking about "green shoots." Well, the green shoots have come and gone and quantitative easing has come and failed and the unemployment picture has not improved but gotten worse.

    How Has The Fed Done With the Mandate of Stable Prices?

    Are you paying more for gas, electricity, food, or less than 10 years ago? How about 5 years ago? Prices have been rising and unfortunately so has poverty while the last three years we've seen incomes fall. Look no further than oil and gas and the extra burden these rising prices have put on the consumer. The good news is, oil prices have come down, but why are gas prices still so high almost everywhere I go?

    Yes, interest rates have fallen in the Fed's attempt to try and stimulate the economy with bouts of quantitative easing, but is this policy working? Is the economy growing? How do seniors like the lower income they are receiving on their CD's and Social Security payments? At least an investment in gold would have helped them maintain some purchasing power the last 10 years.

    Yes, that's right, the one investment; "gold," that most financial advisors and media have been mocking over the years, including journalists at CNBC, would have helped buoy one's portfolio from the Fed's failed attempts at "stabilizing."

    How Has the Fed Done With the Mandate of Regulating Systemic Risk and Preserving Financial Stability?

    Let's look at Title VI of the Dodd-Frank Act that was supposed to bring us financial stability;

    Title VI of the Dodd-Frank Act states;

    TITLE VI—IMPROVEMENTS TO REGULATION OF BANK AND SAVINGS ASSOCIATION HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS

    It was assumed that the lack of regulations of these banks and other financial institutions is what led the the 2008 financial crisis that gave us TARP which over $200 million was sidetracked to the banks (not original intent of TARP when both sides of Congress passed it under the Bush administration).

    So has the 848 page Dodd-Frank Act actually saved us? Are the banks playing the game the right way now? The answer is NO!

    To start with, there is not one mention of the sub-investment grade derivatives in the act except doing away with the term ‘‘NOT OF INVESTMENT GRADE’’ in the FEDERAL DEPOSIT INSURANCE ACT replacing it with the words; ‘‘that does not meet standards of credit-worthiness as established by the Corporation.’’ Rather subjective wording isn't it?

    The fact of the matter is, these sub-investment grade derivatives are still listed on the Comptroller of the Currencies reports.

    As I pointed out in Increase In Bank Sub-investment Grade Derivatives Reveal A Need For Gold Insurance, the more risky sub-investment derivatives are more now than at the height of the 2008 financial crisis. Where the heck is the oversight of these banks? What exactly is the Dodd-Frank bill accomplishing? How is it that Dodd, who, among others, gave us banking deregulation in 1999 and Frank, who refused to let anyone reform Freddie and Fannie back in 1992, would be allowed to author such a reform bill to begin with? Are we Americans that gullible?

    Below you will see the most recent OCC’s Quarterly Report on Bank Trading and Derivatives Activities showing how the total sub-investment grade derivatives have grown from 2009 figure of $4,651,146,000,000 when the Dodd-Frank bill was passed to $6,076,250 where they are today. How is this reform? The bad news is, the maturity dates are moving closer and closer. Who will be the counterparty to these sub-investment grade derivatives?

    Overall, the Fed has failed miserably in all of three if their mandates. In fact, they have just made things worse and will continue to do so with their bouts of future quantitative easing. See; 4 Reasons There Will Be Future QE And A Higher Price For Gold and Silver.

    What confidence do you have moving forward that the same group of folks who got us into this mess in the first place, and have declared the "recession is over," will get us out of this mess? If a Fed tree falls in the forest, will anyone know it was used for printing more money? If the Fed just says the recession is over, the facts speak otherwise. Don't believe them. 

    Do you really think the unemployment picture will improve in the future when we don't produce anything at a reasonable cost any longer thanks to NAFTA, GATT, CAFTA, the WTO, and too many regulations? It's no wonder our companies have gone off shore.

    Counteract the Fed With An Investment In Gold and Silver

    Many are waking up to the game the Fed is playing by investing in physical gold and silver. It is the insurance needed that of course, like fire, auto and health insurance policies, you hope is never collected upon. But what are the odds you put on the gold and silver insurance being needed? It all depends on how much you understand the economics, math and the banking system and how the Fed works which is why I write these articles. 

    Investments in quasi gold and silver like the various gold and silver Exchange Traded Funds (ETFs) like GLD or SLV are good "trading" vehicles. But when push comes to shove, you can't take delivery of the metal unless your account is over $100,000. Even then, I just don't trust ETFs that have the names of one of the sub-investment grade dealing banks mentioned above listed as a custodian. Besides, the gold and silver held in ETFs are not insured.

    The Fed Talks a Good Game...But...

    I like to include lyrics to songs with my articles sometimes. Usually I just let the lyrics speak for themselves, but this time I decided to change the lyrics of a song called "On and On" by Stephen Bishop. Below you will see his version for a couple verses, and below my updated version. Enjoy (sort of)!

    Down in Jamaica
    They got lots of pretty women
    Steal your money
    Then they break your heart
    Lonesome Sue, she's in love with ol' Sam
    Take him from the fire into the frying pan

    On and on
    She just keeps on trying
    And she smiles when she feels like crying
    On and on, on and on, on and on

    My version:

    Down in the U.S.
    They got lots of Wall Street Bankers
    Steal your money
    Then they foreclose your property
    Lonesome Bernanke, he’s in love with ol’ Greenspan
    Take us from the fire into the frying pan

    On and on
    The Fed just keeps on failing
    And they smile while the rest of us crying
    On and on, on and on, on and on...

     

     

     

     



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Long Physical Gold and Silver
    Oct 17 3:45 PM | Link | 3 Comments
  • Gold and Silver Analysis

    To gold and silver investors, and those who are contemplating investing in gold and silver.

    I am taking a few months off from writing on Seeking Alpha to finish my next book. I am tired of making comments on the negative posts about gold and silver and dealing with young kids who think they know it all, and put so much faith in Federal Reserve Notes and our government and Fed thinking they will get us out of the mess they got us into. This is what our education system has done for us. These kids don't know math and can't understand economics, except that of the Keynesian version taught in all our schools. They also can't refute what is to come with the banks. 

    My next book is a Christian/Political book and will lay the groundwork for real change in America, not in a theorcratic kind of way and not the change that Obama gave us with multiple trillion deficits, and not the change that Bush gave us with less freedom and bailouts of banks via TARP.

    As Martin Luther King said; "I have a dream!" This dream comes from a guy who sells gold and silver bullion too. But I sell it for a reason. I sell it so people can protect themselves from what our government and Fed have done to our economy and our monetary system. This doesn't mean, as a U.S. citizen, I sit by idly and let them continue with their abuses just to make a buck. I'm an American damn it. It is my duty given to me to by the Declaration Of Independence; "to throw off such Government, and to provide new Guards for their future security."

    Choosing one evil over a lesser evil is not the answer. But I do have the solutions where we can all get along and make a difference in the future of America, whether black, white, asian, hispanic, Christian, agnostic, or what have you.

    I will continue to write articles on my own website; Buy Gold And Silver Safely - buygoldandsilversafely.com/blog and an article I have been working on of late, and will be coming out soon, is one you might be interested in. It is a further analysis of our nations top banks and the fact they too will at some point need Fed/U.S. taxpayer rescue to "prevent a depression" as Treasury Secretary Geithner will scream at some point, just as Secretary Snow did in 2008. Just watch. Heck, Geithner is already warning us that we have to raise the debt ceiling or 2008 will be moderate in comparison. Congress doesn't want to make the cuts necessary because of lobbyist interests that maintain the status debt quo. It cannot last and that is why you own gold and silver.

    There is a place on my website home page where you can sign up for my artcles. It's on the right hand side of the home page found here: buygoldandsilversafely.com

    I have written quite a few articles you may be interested in. I don't post everything here on Seeking Alpha. Years ago I used to complain to Seeking Alpha about not giving any respect to gold. Then they finally did.

    I may or may not write for Seeking Alpha again. I haven't decided. I will keep writing though, and keep challenging those who discredit gold and sivler and know nothing about history and money.

    Thanks for reading...

    Doug Eberhardt

    My last article written a few days ago:
    Is Silver Still A Bubble at $35 An Ounce?buygoldandsilversafely.com/gold-and-silv.../

    Other articles I have written of late:

    Since 1971 What Has Been A Better Return – Stocks Or Gold And Which Will Have A Better Future Return?
    buygoldandsilversafely.com/gold/since-19.../

    Is Gold A Good Store Of Value?
    buygoldandsilversafely.com/gold/is-gold-.../

    Is Silver Money? And Why You Should Own It
    buygoldandsilversafely.com/gold-and-silv.../

    Buying The Dip In Silver and More Conversations With CFA’s And Bubble Forecasters
    buygoldandsilversafely.com/gold-and-silv.../

    CFA Claims 3 Myths That Will Pop the Gold Bubble But Does Not Reply To My Critique
    buygoldandsilversafely.com/gold/cfa-clai.../

    Morningstar Joins The Anti-Gold Crowd
    buygoldandsilversafely.com/gold/mornings.../

    2011 Gold and Silver Prices Falling Nothing To Panic About – Decline’s Always Occur

    buygoldandsilversafely.com/gold-and-silv.../

    NY Times Says The Precious Metals Bubble Looks Set To Be Pricked
    buygoldandsilversafely.com/gold/ny-times.../





    May 25 12:50 PM | Link | Comment!
  • 4 Ways Gold Dealers Rip You Off

    The holidays are around the corner and for some families gathering together, the conversation will turn to the state of the economy and what to do with one's investments. Eventually, because of the heavy advertising on television and radio by gold dealers, the conversation may turn to acquiring gold for one's portfolio. After all, if you listen to Glenn Beck, then you are probably very worried about the state of the economy.

    While there is good reason to be worried about the state of the economy, there is even greater reason to be worried about who you buy your gold from and what kind of gold you should buy. The same is true for silver.

    Much of this information is found in my book, "Buy Gold and Silver Safely." In this book I go into further detail as to what lengths gold dealers will go to in trying to separate your hard earned money from you and putting you into inferior gold and silver investments.

    Gold Dealers Know How to Talk the Talk

    There are many gold dealers who rip you off without you knowing they are doing so. The ironic thing about this is no one seems to be exposing the many gold dealers who do this as frauds.

    In fact, I tried to let congress know of what these gold dealers were up to by pointing them to Chapter 8 of my book, the chapter that exposes gold dealer tactics. Congress actually wanted me to "definitely" testify against gold dealers back in September of 2010, and then the next day, after my book was sent to the Energy and Commerce committee for review, decided against my testimony. This was after they said to me "people need to read what you have written. It's exactly what we have been speculating."

    How do I know what Congress wanted to hear? I worked for one of these gold dealers that they were investigating for six months back in 2005. But what I find fascinating about this whole ordeal where Rep. Anthony Weiner's office was trying to discredit Glenn Beck by attacking his advertisers, primarily Goldline International, is that nothing has been said of it since. Goldline had gone out and hired a lobbying firm and that was the end of that I guess. Weiner's office has been silent on the issue since September as it seems to have been swept under the rug.

    Even the NY Times, who interviewed me for a story on Goldline and Glenn Beck, has not printed that article critiquing the industry. If you ask me, they are all in it together, keeping the truth from you, the consumer! I guess they would prefer you fall prey to unscrupulous gold dealers who profit from your ignorance about buying gold and silver.

    The Purpose of Writing This Article

    This article addresses the 4 ways gold dealers rip you off.  It is meant as a point of discussion around the dinner table over the holidays in protecting individuals, mother's, father's and grandparents from making big mistakes in buying gold and silver.

    Instead of ignoring conversations about investments this holiday season, reach out and help those who are considering investments in gold and silver with this information so they don't make the same mistake that countless others are, costing them 30% or more of their investment. Help your families keep the wealth rather than give it to greedy gold dealers. It's important more now than ever to join the conversation and do what's right for the family.

    As 2008 - 2009 showed, the advice given by financial advisors failed everyone once. But physical gold and silver investments did not fail and haven't now for 10 straight years. Get educated on that for what you do not know about gold and silver. Learn the truth before you go trusting someone on the other end of the phone who will feed you the following lines of mistruth and myth.

    If you are reading this article after the holidays, the gold dealer tactics will still be in play. It's what keeps them in business and able to afford the expensive advertising on television and radio.

    The 4 Ways Gold Dealers Rip You Off

    Gold Dealer Rip Off #1 - Threats of Confiscation

    This is the number one tactic gold dealers will use in telling a story about how a certain type of gold could be confiscated, while another type of gold wouldn't. In fact, I dedicated an entire article to it called; Gold Confiscation Won’t Happen Here and added an analysis of silver confiscation.

    It is an easy subject for gold dealers to talk to people about because not nine in ten people know anything about it. So armed with a little history, it's easy for the gold dealer to tell a story and convince most unaware buyers of gold to purchase the more expensive type of gold they recommend; the kind they claim can't be confiscated.

    All you need to know is the Executive Orders that once directed the government to confiscate anything more than $100 of gold back in 1933, are not in existence today. Every single Executive Order has been rescinded.

    But that won't stop gold dealers from still trying to claim the government can confiscate certain gold and not other gold that has a premium associated with it. They will claim that gold and silver that have a "recognized special value to collectors of rare and unusual coin" will not be confiscated. This is pure baloney.

    While it is true that these coins may be collectors’ coins, it is irrelevant because again, all executive orders pertaining to confiscation of gold have been rescinded.

    If a gold dealer uses this tactic, just hang up on them. Tell them, "I've heard enough" as the next words out of their mouth will be an attempt to sell you gold or silver that is highly marked up compared to the spot price of gold, to the tune of 30% or more in some cases. Even 10% of a mark up is too much to pay.

    Technically, the government could confiscate anything they wanted to with existing laws in place. Would they try and do so by knocking on everyone's door and searching homes, boats and motor homes for their gold coins, or would they just talk to the custodians of the Exchange Traded Fund (NYSEMKT:ETF); GLD and ask them to hand over their tonnes of gold?

    Before any potential confiscation were to occur in America, they would have to repeal the second amendment of the Constitution first. Don't buy expensive gold because of any worries about what may or may not occur in the future. Be smart with your money.

    Gold Dealer Ripoff #2 - European Coins Will Give You More Gold For Your Money

    This ploy was the number one question gold dealers would ask a potential buyer of gold. They would ask the question; "Do you want a coin that is rare and pretty, or one that gives you the most gold for your money?" Most people won't realize it, but it is a trick question as either answer the gold dealer makes their large commission.

    If the potential customer answers rare or pretty coin, which almost never happens, they end up with a St. Gauden or some pre-1933 coin that has a high premium to spot associated with it. These coins may or may not appreciate more than the spot price of gold moving forward. More importantly, the premium one pays for them could disappear as the U.S. currency falters or defaults. This means that when it comes time to selling it, buyers will only be interested in the gold content, not the rarity.

    But worse for the potential customer is the fact that if they answer, "most gold for your money," the gold dealer will push them toward European gold coins like the Swiss francs, British Sovereigns or French Roosters. These European coins do give more gold for your money, but only compared to the rare coins, not to gold American Eagle bullion coins. This is the dirty little secret about how gold dealers profit from those who call in to buy what they think is bullion gold, but turns out they pay a 10% to 30% or more premium to acquire it.

    I go into more detail with this tactic in "Don’t Buy European Gold or Rare Coins – Gold Dealer Ripoff And Media Bias Exposed."

    Gold Dealer Ripoff #3 - First Strike or Early Release Coins

    Another ploy gold dealers practice is to get people to buy their bullion coins that normally have a 2% to 10% markup at a 30% to 100% markup (some gold dealers will mark them up for less). What they do is get the new American Eagle gold coins produced at the U.S. Mint that come out of production early each year certified by National Guaranty Association (NGC) as a higher value collector’s coin that may someday be worth much more.

    They may call these coins “First Strike” and have their salespeople tell prospective buyers that these coins were the first minted for a certain year (the first 100,000, let’s say) and therefore are considered to be more valuable than the coins minted later in the year.

    What the gold dealer will do is buy the American Eagle gold bullion coin from the U.S. Mint for the normal 3% or so markup in price over spot. They will take this coin and send it to NGC and have it graded. The cost to grade the coins might be $50 each.

    The coins will come back graded an MS 69 on average, with some coming back as a MS 70. Now the gold dealer can sell these coins with a 100% or more markup over the spot price of gold. This is pure genius from the perspective of the gold dealer, if you ask me. Take a product worth x and sell it for 2x through the telling of a fable.

    However, since there was no way to prove the coins were “First Strike” coins, NGC and the gold dealers had to regroup and subsequently came up with the new description “Early Releases,” which they use today.

    From the NGC site:

    To qualify for Early Releases designation, all coins must be received by NGC within 30 days of their release by the US Mint, or documented as being received by an NGC approved depository within this same 30-day period. Coins being sent directly to NGC do not need to be accompanied by original packaging or shipped in sealed mint boxes, but must arrive within the time period described above. The Early Releases request must be noted on the submission invoice, and additional service fees apply for the special label and designation verification.

    The ability of gold dealers to profit on such a story is in my opinion one of the reasons the U.S. Mint keeps running out of coins. What gold dealer wouldn’t want to double their money at the expense of the buyer?

    Gold Dealer Ripoff #4 - Just Get the Money In-House and Let a Senior Sales Representative Take Over the Sale

    Another tactic gold dealers will use is if a caller is adamant about buying bullion coins like the American Eagle 1-ounce bullion coins, they will write up the order, but can’t confirm the price until they receive a check or have the money wired in (the check of course would have to clear first). Once the gold dealer has the money in-house, they will call the buyer back and attempt to switch them to the rare collectors’ coins. If that gold sales representative fails to do so, they will get one of the in-house seasoned pros on the line to hardball you, scare you, play upon all your fears about what’s going on in the economy and how the government is going to someday take your gold from you, in trying one last effort to get the sale. Their sales pressure is immense.

    The senior sales representative gets on the phone to try and talk the buyer out of purchasing gold bullion coins and make them feel guilty about their purchase, even to the extent of yelling at them or calling them an idiot. Then they will put the buyer on hold for five minutes for no reason if they don’t get their way. They will treat the bullion buyer like dirt, so the buyer needs to expect this treatment and keep asking “when will I receive my coins?” Even then, make sure the coins received are the coins ordered and for the price quoted by checking the paperwork.

    This tactic is used quite often on IRA or Roth IRA rollovers or transfers where funds are received by the new custodian. The sale of the gold and/or silver has to be conducted through a gold dealer and the sales person who makes the trade locks in the price. Unfortunately, many of these salesmen can charge up to 30% for even bullion coins that are acquired with your IRA. They know that once they have the funds in house, they have more control over the sale.

    Not all gold dealers are alike, and if an investor is prepared with the right questions, they can separate the good ones from the bad ones. Caveat emptor!

    Other Points of Interest When Considering What Type of Gold to Buy

    Many gold dealers won't buy back gold and silver bars. This means you may have to pay the extra cost to have them assayed when it comes time to selling.

    Gold dealers will use every trick in the book to get potential investors to forget about investing in gold bullion and end up selling them either a pretty coin or something else that won’t be easily liquidated if the U.S. dollar were to decline to new lows or default altogether, except for the gold content value of the coin.

    While rare coins could go up in value beyond the gold content, as the economy deteriorates and it comes time to liquidate one’s collection, most buyers won’t care about any collector’s value. All they’ll want is what the gold ounces will buy them in the marketplace.

    What investors need to do is buy bullion gold with their Federal Reserve Notes today, to hedge their U.S. dollar based portfolio risk consisting of U.S. stocks, U.S. corporate bonds, U.S. government bonds, U.S. treasuries and CD's at the bank. They need to possess some real wealth so they can still go buy food, medicine and make ends meet in the future.

    I may buy a few coins because they are aesthetically beautiful, but not as an investment. Gold and silver bullion are all you need.




    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Long Physical Gold and Silver
    Dec 22 3:03 AM | Link | 2 Comments
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