Tradio Investments if Dollar Crashes
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Steve Duke: We’ve been talking about prospecting things, and we just had a caller call and say, “You know, what do you feel a good investment would be if, really, things hit the fan and things start to go south for everybody?”
Well, you know it’s funny, because I’ve thought about this a lot, and you know, if you walked into my shop at Westchester Gold and Diamonds, you’ll notice a large propensity of jewelry – lots of gold chains, silver chains, diamonds, gemstones, antiques, collectables and there’s many nights that I’ll wake up in a cold sweat, thinking to myself, “You know, why is any of this stuff worth anything?”
And when you look at it, you know, you can’t eat gold or silver, or diamonds or gemstones. That’s true, and you know, you’ll get the doomsday people that are – and I’m not pointing fingers, and I’m saying they’re right or wrong, okay, because it makes a lot of sense as well.
We have people who are stockpiling guns and ammo, is that a good thing to have? Well, you know, if you ever have to go out and—
Ken: Not a bad investment.
Steve: You know, if you have to go out. And let’s say we have a shortage of food and supplies, you can certainly go out there and hunt for your dinner, okay? Now, I think the main thought behind a lot of these people who are stockpiling their guns and ammo is not that they’re going to go out hunting, but that, you, if things really went crazy, that stuff is mainly there for protection.
I can understand that too. But we’re going to need some sort of medium of exchange at some point in time, to pay for goods or services, and historically throughout our civilizations, gold and silver has always been precious. Why? Because there’s a limited amount of it – and yes, I know if you go out there mining and you hit the Bering Sea you’ll find some more of that gold, you know.
Or you could go out there and go diving for diamonds, and yeah, there’s – when I say there’s a limited amount, you know, it’s not something that you just walk around the street and you find lying around. So I’m going to have to say that gold and silver as some sort of a means of exchange is going to be something that’s very important.
You know, historically it’s always been worth money, and you know, I remember talking to a gentle 30-some years ago when I first got into this business. I had just opened my store up and he told me about how he worked in a factory in Germany during the war. And in the morning, they would pay the workers with currency, and inflation and deflation was so rampant at that point in time that the workers would take these piles – and I mean literally, the fellow shows me, he held with his hands like 18 inches high of paper currency.
They would run out to the fences around the factories and give this money to their wives so they could run out and buy good, food and other supplies for them to live on, because at the end of the day, they were paid again, the same amount of money or the same rate of exchange, and yet it was almost twice the size that they got paid in the morning.
I mean, this shows you the inflation that was going on at that particular time, and we don’t know if that’s ever going to occur here, but you know, when you look and you say, “Okay, well I’ve got plenty of cash.” Unfortunately, the cash is not going to buy as much as it did every other, you know, every day. It’s going to be worth less because the paper is going to be losing a lot of its value.
And if we need more paper currency, then we’ll just print it. Unfortunately, there’s really nothing to back it up, but we’ll just keep printing more and more of that currency if we need it. And that sort of makes sense to a lot of people, and to some people they just look at it and go, “What are we thinking?”
Well – so I’m going to say, you know, hard assets have been something that people have touted for years and years. There was a fellow who used to publish a paper and he dealt in gemstones. His company was called The House of Onyx, and he used to push colored gemstones – that they were valuable, you could turn around and put, literally, millions of dollars worth of gemstones in your pocket and go anywhere in the world with them.
And I remember reading this and it sort of made sense to me, and why was he sharing all of his information with us? Because he sold gemstones. And when he sold the gemstones, you would pay him this paper currency that he sat there and said was basically worthless. But he sure wanted to accumulate a lot of it.
And we find that it just goes around and around. It’s kind of a crazy cycle, you know. Right now, the world revolves around cash, but you know, if at some point in time that cash starts to lose its actual value and you walk into Winn Dixie, you know, and all of a sudden you look at this prime cut of meat and it used to be $8.99 a pound and now it’s $123 a pound and you’re going, “Hoo, that’s kind of a lot of cash!”
So we find that, you know, at some point in time perhaps we’re going to go to the point where it says, “Okay, this meat is $129 a pound, or it’s a half ounce of .999 pure silver, or it’s $4.05 worth of 90% silver coins, or it’s 1/4 of an ounce of gold,” and you know, we may get to the point where yeah, we start having to actually having to work with hard assets again.
Now, so when people come to me and they say, “Well, you know Steve, what should I put in my portfolio?” I’ve talked with a lot of people who have some extensive portfolios with lots of things in them. And it’s – this is just my take on everything. I mean, everything’s got value, you know, and we’ve talked about all kinds of collectables over the years here.
We’ve talked about everything from Beanie Babies – which basically became worthless, and I told you that years and years ago, do not invest your hard earned money in them. But there’s lots of people who have fantastic collections of Beanie Babies, and they can show it to you, and then they can just sort of sit back and say, “You know, I wish I hadn’t put so much of my hard earned money into these Beanie Babies. It’s a little tough to trade them for anything.”
And we had people who collect matchbook covers. You know, it’s great to collect stuff, you know. And I talk about this all the time as far as collectables go. You know, by all means, if you’re collecting items because you enjoy them, if they’re purely an enjoyment type of thing and you look at them, you touch them, you fondle them, it makes you smile, then by all means be that type of collector.
There’s collectors out there who buy the finest of items they can find, the best condition, some of the rarest items – whether it’s music boxes or bird boxes, whether it’s toys, you know, vintage toys. Whether it’s weathervanes, whether it’s cookie jars. And all of these things, believe it or not, have some extremely valuable items in it.
You know, not all of them are great values, but at one point in time, lots of these items brought thousands and thousands of dollars. We find with the collectable market it travels in cycles, it’s cyclical. Sometimes these items bring extremely large amounts of money and then all of a sudden, when they’re out of favor, the items are not worthless, but they’re worth a pittance of what they originally had started at.
So, you know, whether it’s a good idea to deal in these type of things, is it a good idea to put them away, again, they were rare, they’ll always be rare. Most of the time there’s going to be someone out there who wants to buy that item, but do they retain their value? Unfortunately, not all of the collectable items are going to retain their value.
I myself collect an awful lot of things, you know, and I look at items that I may have spent $5,000 or $6,000 for, and thought that, you know, at some point in time I could sell that item for $8,000 to $10,000 and I could have. But I enjoyed it, I liked it, I said “If it’s rare now, it’s going to be rare later.” And you know what? It is rare later.
But, the amount of people who want to collect that item has fallen. There’s less items out there, there’s less people who want to collect that item, so when that item comes up for sale whether I’m selling it to a private, or if I’m putting it in an auction, that item will bring less money.
That’s just, that’s one of the fallbacks of collectables. You know, do some of them continue to go up in value? Of course some of them go up in value, but again, you have to understand that the value of collectables, lots of times not only how rare it is, it’s the amount of people who are going to be able to collect that first of all, because of the value of it, and secondly because it really has a large bearing on collectables.
And we talked about this too, is the fact that on collectables, if someone has a love for that particular item, okay, then they’re going to enjoy collecting that thing. Did they grow up around the particular type of antique or collectable? Did their folks, were their folks wealthy and they had some of the finest items around? So when they grew up, they had an appreciation of that particular item.
Now, the folks have passed away, they’ve gotten as old as their folks, and now they want to dispose of the items. Well, there’s only a limited amount of people in that age bracket who grew up with those items, who appreciated those items, and had the ability to pay exorbitant amounts of money for the high quality that they have.
So, you can see that those items have gone down in value. It’s just like if we look at some of the 1930s and 40s cars. You know, the Studebakers and the Packards and stuff. They used to bring – 20 years ago, at the auctions, they would bring crazy money, and people would look at each other like, “Wow, I never had any idea that would be worth that kind of money.”
Well, those people who were brought up with those cars, to appreciate those cars, they drove them with their Dad. They’ve gotten older, and they don’t need it any more. So the stuff from the 30s and 40s have gone down in value. Have they really lost the value? Are they not as desirable, you know, even though it’s a grade thing?
They’re still desirable, but there’s less people who grew up to appreciate that item. What’s bringing in big money now? The muscle cars from the 60s and 70s. Why? Because Baby Boomers now have money. They grew up with them, they remember their Dad driving them, so hence, they’re desirable. Well, are they as rare? Heck no!
There’s still plenty of that stuff out there, but again, it’s a new market and that’s why that’s market going to increase in value, because these people have the money to spend. They want to recapture a certain time in their lives. So collectables, I’m going to say, probably are not the greatest investment anymore, as far as putting things away.
Gold and silver, in my estimation, are always going to be rare. They’re always going to be recognized and valuable. People are always going to understand them. You know, how should you get involved in buying some of these items, putting them away – you probably want to get, if you’re going to buy gold, I’m not telling you that jewelry is going to be the best way to go, you know.
Is it an investment in the future? Yeah, it’s an investment in the future, but it’s more of an investment in the future of the person you’re buying it from. Because you’re going to pay a manufactured price for that jewelry, and as long as you enjoy it, yeah. You’re always going to have value.
You know, if you need to borrow money or sell it, you’re always going to have something, a certain amount of gold that you can sell, so yeah, that’s a great idea.
Can you go into Winn Dixie and buy groceries with it? At this time, no. You know, years from now could you? Possibly. But if you’re going to do that, then what I would suggest to people who are going to get involved in putting some gold and silver away, you need to have it, you need to buy it in invisible pieces, and what do I mean by that?
I mean stuff that’s already divided up so that we know exactly the percentage of gold that’s in it. You know, whether you buy gold coins that are divided into a one tenth ounce, one quarters, one half, one ounce coins. You know, if you walked into Winn Dixie and said, “Okay today we need a one ounce coin for such and such groceries.” You put your hand in your pocket and you have one.
Or you need one tenth of an ounce for something. We have that. They also make them in much smaller divisions – one gram and two and a half grams, five gram bars. Now you certainly, you pay a bigger premium for that type of gold, because it’s in a smaller division, which means you know, if you could buy it for the spot price, you know, then a dealer’s not going to make any money whatsoever.
You know, on a one gram bar, he might be able to make $5, which means you’re going to lay out approximately – let’s call – $70 and when that dealer sells that gram of gold to you for $70, he made himself $5. So, you know, it’s a lot of money that goes from a bank account to show that all I made was $5 today on this particular transaction.
You know, I did it 100 times today and I made $500, but I ran, you know, $7,000 through my bank account. And so a lot of the dealers would like to put a little bit larger margin of profit on that particular sale. It’s worth your while to turn around and shop to find out who’s going to give you the best discounts, but you have to understand that really none of the dealers are going to get really rich on selling bullion.
But you do it on a volume type of thing. So, should you have gold put away? I would say you should have a certain amount of gold put away, and I would say that, you know, rather than just having a big blob of gold, you should have some sort of divided type of thing – whether it’s in grams, or whether it’s in portions of an ounce. I would say that’s something to put away.
Silver bars, silver coins – you know, again, most of the time you’ll find your silver comes in one ounce bars, or what we call “rounds,” it looks like a round coin. This is one ounce.
The other thing too is – you might want to check into, is what we call “junk silver.” Junk silver is basically silver coins that were printed by the government before 1964. The reason they stopped printing them after 1964 is when they lifted the ability for silver and gold to run on its own market, they found that there was more silver in a half dollar than fifty cents.
At that time, in ’64, when they lifted that it was worth about, oh, about $1.10 back then. So, you know, why would the government pay us out 50 cent pieces worth $1.10? Well, they couldn’t anymore, and they realized that, so they stopped printing them in 90% silver.
They actually, for a few years after that, from ’65 to ’69, they started printing 40% silver because people wanted to feel that silver, have the ability to do it so by making it only 40% silver, the 50 cent piece was still 50 cents, but then silver took off and things went crazy. Our coins became worth more for their bullion value than their face value.
Should you have some of this stuff put away? Yeah, I would say so and the only reason is this – that you already have dimes that have a certain amount of silver in them. Quarters that have a certain amount. You’ve got 50 cent pieces that have a certain amount of silver, and again if you went in to buy your groceries, you know, if you had a one ounce silver coin – and let’s say silver was $100 an ounce, now you’ve got to figure out a way to cut your coin in half.
You get your shears out and you cut that thing in half and you say, “Okay, here’s $25 worth of silver.” Well, it gets a little sticky as far as that goes. Now we’re back to the old Wild West days when they used to shave—
Ken: Take out a knife!
Steve: Yeah, they would take – you know, they would shave—
Ken: Whip out the Bowie knife!
Steve: They would shave little pieces off the gold coins, and short each other by the weight, or they would shave off little pieces of the silver coins and short each other.
So, if it’s already divided and someone knows exactly what the division is and how much that weighs, then they’re going to have the value for those silver coins or those gold coins. I think in my mind, the 90% silver coins are a real easy way to have that division that we know that the government made them.
We know how much silver’s in those things, and yeah, there’s a certain amount of wear and tear on them, so they come out a little bit lighter on some points. But still, I would say to you that this is a great way to buy smaller divisions of silver.
Now, we talked about hard assets as far as gemstones go. I’m going to tell you probably gemstones are the worst particular investment you could possibly buy and put away. I know you read about or you hear about on television all the day long. About how tanzanite is rare, and the mines have flooded again, and you know, the workers have revolted because of conditions.
That’s all B.S.! Yeah, there – the mines have flooded, but you know what? They pump the water out! They didn’t crush – they’re not gone. There’s a huge amount of tanzanite out there, and yes, some of the really fine tanzanite has gone up in value.
You know, I find that when I’m buying it wholesale, you know, I’m paying anywhere between $50-100 more per carat for it for really great tanzanite. But you know what? If I had to go to Winn Dixie, who at Winn Dixie is going to tell me how much a carat that tanzanite is worth?
I see it every day. I have people come in, they’ve bought tanzanite rings on cruises all around the world. They come in and they’d like to sell them. “You know, I paid $9,000 for this ring, you know. I know this tanzanite’s worth $2,000 a carat because I got an appraisal on it.”
I don’t care what your appraisal said. The most expensive tanzanite I have to buy – and I’m talking gem quality, rare, perfect color, large stones – is going to cost me about $600 per carat. If you go to Tiffany’s or you go to one of these big stores and they’ve bought that piece of tanzanite for $600 a carat, I can guarantee you that they’re going to sell it to you at $3,000 a carat.
Colored stones have the largest mark up of any gemstone there is, and I’m not just saying tanzanite. I’m talking about emeralds, rubies, sapphires, Imperial topazes. Any gemstone that’s rare, that’s coveted, that’s difficult to find, that comes in a large size – which is unusual. And we talk about large size – you know, tanzanite in 10 carats is a large stone.
A ruby in a three carat is a large stone. So depending on the particular gemstone it’s unusual to find these, some of these larger stones, you know. And what might be large for one stone at 10 carats, it would be large for one stone, a three carat could be large for another stone.
But the biggest problem is really having someone be able to determine how much those gemstones, those colored gemstones are worth per carat, and this is how they’re bought and sold by the weight of the stone. And we measure the weight of stones in what we call carats.
So, you know, we look at diamonds, okay? Diamonds, at least, have a pretty uniform rating system as far as the clarity of the internal characteristics that you look at inside of that diamond. Then we also look at the color of that diamond, and it’s pretty uniform. Unfortunately, the grading for color is not that uniform because lots of jewelers don’t have a real background in buying and selling loose gemstones or loose diamonds.
So, in their mind, they look at it and say, “Okay this diamond is this color, as far as I’m concerned,” and they sell it for that color. They’ll put it in black and white on your appraisal – “That’s what that color is.” If we have to send it to independent gem lab, it would probably come back as much as one to two, three, four shades different.
Unfortunately, there’s gem labs out there that do the same thing. You know, they grade it according to their standards, which are not really worldwide standards. So it’s important to, you know, know what if you’re buying gemstones or diamonds as an investment, what you’re actually getting. You know, is the person you’re dealing knowledgeable? Do they really have a working knowledge of the color and the clarity of that diamond?
You know what? I myself have bought and sold literally millions of gemstones and diamonds. And lots of times, you know, if I’m getting involved in a particularly expensive gemstone, where there’s a difference of – it could be $100,000 gemstone or diamond, it could be $150,000 diamond. The difference is whether there is an internal characteristic the size of a pinpoint – the size of a pinpoint – on some diamonds could make the difference of as much as $50,000.
I don’t know about you, but I don’t like to roll the dice for that $50,000 that much. A lot of times if I’m not sure, I’m the first person to tell people, “Look, I’m a buyer between $100,000-150,000 on this diamond, but we have to send it out and get it certified by an independent lab. I’ll pay for it, and I’ll buy it according to what that lab grades it at.”
And, you know, I’m smart enough to realize that sometimes we all have our capabilities and sometimes when it comes to putting your hand in your pocket for big money, we need to get an outside opinion on certain things like this.
So yeah, if a diamond has a gem report specifically from what we call “GIA” – Gemological Institute of America – this would be something that you could put away and it’s traded worldwide. You could pick up the phone and call somebody in China. Say, “I’ve got this diamond. Here’s all of the specifications, the measurements, the grade on it.”
And then I can give you an offer on the phone just from that information, where if you just pick up the phone and say, “Look, I’ve got a diamond. It’s J color, it’s an SI-1,” and he says, “Well, hold it closer to the phone for me, because I can’t quite tell what you’re talking about.”
Then we don’t have an item that’s going to be readily tradable. If we don’t have something that you want to put away and pay the maximum amount of money for it unless it’s a graded certified stone.
So, you know, our caller asked me what would I put away? Yeah, there’s certain hard assets that I – we’ve talked about just now, in gold and silver, certain diamonds, again, graded, that I would think are good things to put away.
Can you eat them? No. But most people don’t have the capability of storing enough food or provisions to really get involved in talking about that. You know, should you have land that you can build, that you can grow your own groceries and things on? Yeah, that’s probably not a bad idea either.
Can you find your own water supply, you know, from a stream that’s actually drinkable, without really having to put a whole lot of chemicals in it? That would be a wonderful thing too, but that’s certainly a limited type of thing.
So, you know, as far as hard assets go? Yeah, I would say to you, gold and silver are probably the two best. Probably a little bit of platinum, which is also a precious metal, and some certified diamonds in different sizes. Or also there might be something that might be worthwhile to put away for you, for the future. None of us really know what that’s going to hold for us.
I’m Steve Duke, the owner of Westchester Gold and Diamonds, talking to you a little bit about what the future might hold for all of us.
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Have Questions about your antiques, estate jewelry, collectibles or old treasures?
If you have questions for Steve Duke to answer about your jewelry, antiques or collectibles, just send a photo of the item and your question directly to Steve Duke at WGDiamonds@HotMail.com and Steve will research it for you and you may be contacted to participate in an upcoming Tradio episode. Be sure to include your name, email and phone number along with your question and email it to: WGDiamonds@HotMail.com