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How Economic Cycles Help Investors
In 20 years, our study of cycles has convinced us that they are your key to precious metal and rare coin profits. We believe precious metals and rare coins operate much the same way other investment markets function which are driven by economic cycles. The typical recession ends in business expansion, which causes growth in the economy which then overheats. This eventually leads to recovery and recession which starts the cycle again.
"If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the cotton that their fathers conquered."
Thomas Jefferson (1743-1826)
In the middle of such economic cycles the government steps in with economic measures designed "to help us out" instead of letting the free market work out its own problems. They may raise interest rates or even use price controls to influence each successive cycle and believe they have acted in the best interest of the American public. In fact they have simply built into the system another powerful force which will come crushing back on our economic house.
This long-time government philosophy of "helping out" was born and raised in America during the 1930s depression. And the end result is now a financial paradox which creates dangerous problems, especially for the middle and lower wage earner of America. Our government now believes all problems can be solved by additional spending.
They thus tax accordingly and continue spending. This leads to inflation which destroys the value of our currency. You don't have to be an economics major to know there is no free lunch. Each successive year our government fails to deal with the core problem of too much spending. The paper money which is created out of thin air has no gold backing to keep everyone honest. With a little homework it is easy to see that as each cycle passes the dollar becomes weaker. This chipping away of buying power is insidious for it happens over decades. If you understand this collapse in purchasing power it is easy to see the necessity of hard asset protection.
But even this is only the beginning for there is an economic dynamic happening that few are familiar with unless you come from a country whose currency has been destroyed. As these cycles repeat themselves there is the chance that something will go wrong and send us into a hyper-inflationary cycle in which the dollar's value could collapse.
The First Big Run 1970-1975
Rare coins and precious metals became investment vehicles in the early 1970s when the world began to question the stability and value of the U.S. dollar. Prior to 1975 gold activity increased and so did the price of quality rare coins. These price increases were caused by inflation fears and the anticipated rise in the price of gold, whose ownership was again made legal in 1975.
The Second Big Run 1976-1980
In 1975 most Americans lost interest in hard assets, a recession was in place, and gold was heading for $130. Everyone said there was no place for gold in modern finance. Only 5 years later gold topped $800 dollars an ounce! This was testimony that something had gone terrible wrong with our paper money system. Energy prices were soaring, inflation was in double digits and people had a right to be scared. Many investors decided to hedge themselves with hard assets and prices on quality coins exploded!
A Stable To Upward Market 1982-1986
By 1982 prices were once again inexpensive relative to old highs. These years saw an up and down gold market which traded between $300 and $450, but saw a quality rare coin market that generally increased in value by as much as 300% giving very little in gains back over time.
The Third Big Run 1988-1989
In these years gold was stable in the $400 range but powerful forces were at work with higher grade rare coins. In fact this market increased in value by perhaps 100% over the 1986 gains but, before this cycle was complete, managed to give back most of that impressive move.
The Fourth Big Run 1989-1990
During this cycle gold once again was steady but quality rare coins were explosive, moving up by 80% as Wall Street began actively buying certified coins. When they exited the market the public began buying common stocks, which caused the DOW to move dramatically higher and, in turn, pushed the certified market lower, thus creating another buying opportunity.
"All the perplexities, confusion, and distress in America arise not from defects of the constitution, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation."
John Quincy Adams (1767-1848)
All of these spectacular moves are documented using independent sources like the Coin Dealer Newsletter - CDN Graphs. And we will provide copies to you at no charge. The market for quality rare coins has once again settled down and we have seen prices on quality material move to 1982 levels!
The Fifth Big Run Is Now In Its Accumulation Phase
It is apparent to professionals that a fifth big run in prices is now in the making. What could set such a run off is difficult to forecast. It could be renewed inflation fears, a movement from the stock market into other investment areas, the new Super IRA which could contain certified rare coins, or any number of positive market forces now working in your favor. The question is whether you will take advantage of this buying opportunity before everyone else jumps on the wagon. This is the ideal opportunity to add to your holdings for there is no fundamental reason for low prices except the investment cycle is now in your favor.