Real Wealth #244 08/31/2009
Why Greenlight Capital shift out of ETF GLD into Physcical Gold is so important!
A few days ago I released an urgent special issue of my Gold & Energy Advisor recommending selling GLD Shares Immediately.
In this issue I pointed to the announcement that Greenlight Capital hedge fund—the largest shareholder of GLD—just dumped all its shares. More than 4.2 million of them but I realized last night when I re-read the issue I didn't make clear why Greenlight Capital is such an important hedge fund?
Greenlight Capital is a “long-short value-oriented hedge fund”. The hedge fund has about 5 billion of assets under management. The President of Greenlight Capital is David Einhorn, who is famous for correctly identifying that Lehman Brothers was under-capitalized and criticized them for questionable accounting practices. Lehman Brothers did file for bankruptcy and was one of the main causes of last year’s global financial meltdown.
Mr. Einhorn has been positioning himself with gold because of his concerns about the Fed’s balance sheet and enormous government spending. He believes as we do that this will cause inflation and our currency debasement. Greenlight originally was buying the gold ETF (GLD), but according to the financial media he has been selling his GLD shares. So where did all the Greenlight Capital GLD sales go? Straight into physical gold, and rumors are swirling that at least seven other hedge funds are following suit.
What’s going on? Why would they sell GLD and buy physical gold? Aren’t shares in GLD exactly the same as physical metal? All the financial media say they are. In fact, the media have been shills for GLD since before it was launched. But GLD is a sucker’s game. I’ve gone on record predicting that GLD shareholders are going to be burned big-time when gold takes off. Looks like a few hedge fund managers are (finally) realizing this too. The only way I play with GLD is for quick options trades and when doing so I use a very short time horizon. Physical gold is the only way to buy gold.
By the way it’s become virtually impossible to track down $50 1 ounce Gold Buffalos. The shortage of one half and ounce
Lat Friday I purchased a small hoard of U.S Gold 1 ounce and 1/2 ounce medals.
Before there were American Eagles and Buffalos the U.S Mint produced a series of Commemorative American Arts Medallions.
These half and one ounce medals were minted over a five-year period from 1980 through 1984. Each honored a renowned American artist. Beginning with 1980, the yearly 1-ounce Commemorative American Arts Medallions portrayed Grant Wood, Mark Twain, Louis Armstrong, Robert Frost and Helen Hayes, respectfully.
The half ounces featured portraits of Marian Andersen, Willa Cather, Frank Lloyd Wright, Alexander Calder and John Steinbeck. The reverse theme for each medallion related to the accomplishments of the pictured artist.
The ones I purchased have been all graded by the Professional Coin Grading Service (PCGS) MS65 or better.
Extremely low mintages and many were melted!
Significant quantities of the 1980 and 1981 and lesser quantities of the 1982 and 1983 have been melted for their gold value. In fact, its no secret that the approximately 850,000 ounces out of a total of 1.68 million ounces were melted of the 1982 and 1983 issues of the gold bullion medallions by J. Aron & Co. in 1984.
What dose this mean...tremendous scarcity of a true collectible!
Here’s a reliable picture of the rarity of these U.S. Gold Medals
Despite the tiny mintages and huge melting you can still finding these in MS60-MS64 uncirculated condition but finding them in PCGS graded and certified holders in high grade MS65 or better is very hard – only small numbers of coins have managed to survive in Choice, Gem or Superb uncirculated condition.
The fact is that most of these gold medals have less than a total 125 graded in MS65 or better. Many have less than 50 graded in Superb MS66 or better condition. In fact, out of the surviving rough 848,000 ounces of gold medals only 817 have been graded MS65 or better by PCGS none have been graded by NGC. Here’s an exact breakdown.
I have just 90 ounces total of these 1/2 and 1 ounce in total that grade MS65 to MS67 and are available for just about the same price of the certified U.S. $50 Gold Eagles that we often sell as a reliable gold coin play. Keep in mind while there are only 817 ounces of the American Arts Medals graded by PCGS there have been hundreds of thousands of American $50 Eagles gold eagles graded in MS65 and better condition by PCGS and NGC.
The MS66 and MS67 quality Commemorative American Arts Medallions pieces sell for a very modest -- small premium more than the MS65’s.
Buy 5 ounces in any combination and we'll add three years to your Gold & Energy Advisor subscription or we'll renew your subscription for three years. What ever is appropriate?
I really like these 1 ounce US Medals because they are also 100 times rarer than American Gold Eagles and Buffalos. Many of them were melted and only small numbers of high grade coins remain. So its a play on both gold with rarity but still sells at a very reasonable premium over the melt value.
Call Finest Known, LLC my rare coin and precious metals company at 1-866-697-GOLD (4653) or 1-561-750-1716.
Gold & Energy Advisor
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