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ROACHES IN THE CORNMEAL
Copyright December 2002 Charles Savoie
Many of you have had the revolting experience of opening a container of
flour, cornmeal, rice, cereal or other food item, and finding insect
activity within. Weevils, roaches and small cocoons in kitchen items
remind you of the unpleasantness of having the wrong people in public
office. Kind of makes you inclined to throw the whole thing away, since
you aren't being fed in some third world jail. Let's relate this to
physical silver investments. Hopefully silver holders paid heed to a
recent warning to be in the right kind of silver---what you own and took
delivery of---rather than unbacked certificates from unprincipled
issuers overseas.
Having assured yourself of possession of your silver and other precious
metals, realize that some unwary investors will fall short of their
expectations when silver flies. They hold physical silver but when they
go to cook their celebration feast, they find roaches in the cornmeal.
Believe it or not, some naïve investors will find they made the
following mistakes, which vary in severity, from dampening profits all
the way up to neutralizing hoped for gains.
DEVASTATING ERRORS
Did you know that some 100 ounce silver bars have only skin-deep beauty,
and feature several millimeters thickness of real silver over a lead
core? A pawn dealer in Arlington Texas has one of these frauds, sawn
into halves on display atop a safe. Before I say any more, understand
that your chances of having one of these fakes is zero if you deal with
honorable dealers which most are. Especially very large dealers possess
near halos on their heads concerning what they sell, as any charges
concerning their good reputation would send clients flocking elsewhere.
We are speaking of small con men types and fly by night operators. How
many of the lead adulterated bars are around is uncertain.
Fortunately silver and lead have known specific gravity sufficiently
different from the other as to leave only the very trusting at risk of
such fraud. Lead is about 8.1% heaver by volume than silver and has no
resonance, so weight and a tap-together test are diagnostic. When the
run-up in silver happens, the reverse of this fraud may be expected to
occur on the part of shady metals dealers---the kind lacking a permanent
physical address. Some elderly person will bring in a perfectly good
Johnson Matthey or Englehard bar, and be told its fake---a counterfeit
with a lead core. Misleading "testing equipment" will "confirm" the bars
to be fake, but the buyer will offer to pay the seller a slight sum for
the thin layer of real silver over the (nonexistent lead) core! I don't
know of any branded bullion with serial numbers that has a lead core;
however, cover all bases when you buy. Start with a specific gravity
test---weigh it, a 100oz. bar weighs about 6.86 pounds on your bathroom
scale.
MORE FINANCIALLY CRIPPLING SCAMS
There was a case of elderly folks at a retirement village of upper
income status where a con man went in and sold Indian head cents as gold
coins. He merely bought a plating device available from any jewelry
supply house. A dealer I heard from told me of a man who brought in a
$1000 face bag of quarters to sell. A note was slipped to the dealer
from an employee who saw the man exit his car with an out of state
plate. A subtle nod from the dealer to the employee conveyed the message
to call the police to the premises. After stalling the seller to delay
him till police arrived, it was requested to do a spot check of the
coins to insure that no clad quarters were in the batch by accident.
The seller opened the canvas bag, whereupon 90% silver quarters were
seen, but exhibited resistance to dumping the coins into a rectangular
aluminum container for spot-checking. The police arrived, detained the
man, and found 158 silver quarters on top of 3,842 clad quarters. After
the arrest, other sacks were found in his trunk and motel room. All his
cornmeal sacks contained roaches, so to speak. Later it was discovered
many of the clad quarters were stolen in a robbery of a vending machine
company employee. I bought quarters from a big web based dealer this
year and found a little roach in the cornmeal---one quarter dated 1967
(which was like looking at the gates of hell) and an 80% Canadian
quarter. However, the other 2,000 coins were 90%. Sometimes a bug in the
cornmeal is "acceptable." Just cull it out and spend it for face value.
CON ARTISTS NEVER QUIT
Along with other scams such as altered dates and fake mint marks
sometimes found in numismatics offered by shady operators, care must
sometimes be taken to avoid getting less than you justly pay for. For
instance, the same dealer told me of a sad lady who brought in 650 one
ounce silver rounds to sell him. She had avoirdupois, rather than troy
ounce, coins. The mail order operator may not have broken the law, since
they were described only as "1 ounce." However, she received 9% less
than what she anticipated because she thought she had troy ounces. On
the subject of getting what you pay for, I high graded my half bag of
2000 quarters by culling the 40 most worn coins and replacing them with
better ones.
This isn't to disparage the dealer I bought from, as that only
represented 2% of the coins. Unless you're paying a premium price to get
better coins, you can reasonably expect some minor percentage of overly
worn quarters, halves or dimes. Another ripoff, however, involved a
victim who received 10,000 dimes and found they were all extremely worn
Mercuries and Barbers, most without legible dates. An attempt to rectify
the deal revealed the "dealer" had left town after burning several
trusting victims. Of the 40 quarters I culled from my first half bag,
they added up to a stack equal to 34 quarters with slight wear. So if
you get over 5% of your deal like that, you could have done better
elsewhere. In the case of the 10,000 very smooth dimes, the victim
probably got 20% less silver by weight than a typical bag.
BAIT & SWITCH AND OTHER FRAUDS
As with scams in precious metals, their parallels exist in their diamond
cousins. Diamond parcels have been "salted" with extremely inexpensive
CZ's which add disproportionate weight, so buyers were cheated on more
than just a piece by piece basis. More common is the grade-bumping in
which better whiteness and clarity is claimed than the stones actually
possess. Have some numismatic dealers lowballed a coin's condition to
pay less for it, then grade-bumped it upwards in their own in-house
appraisal? Bet on it! Numismatics is the trickiest and least
straightforward way of investing in physical precious metals.
Jewelers and pawn dealers have been attempted victims of the new
proprietary product, Moissanite, when it was misrepresented as diamond.
The double refraction of this synthetic silicon carbide variety is
diagnostic in separating it from diamond, as is the lower specific
gravity---about 91%---similar to the avoirdupois/troy ounce ratio. Then
there are real diamonds manufactured as gem grade synthetics, and color
and clarity enhanced diamonds sometimes sold as all natural. In
connection to the widespread rumors of fake sterling silver jewelry
offered as real 92.5% silver, and the many 50% off sales of those items
this fall, are that the same outlets may misrepresent some of their
precious stone offerings.
A large department store had a really stunning ruby item with 60
extremely well matched 4-millimeter stones---matched by clarity, hue,
tone, color saturation, intensity and proportion, for the impossibly low
price of $875. The grinning sales lady assured me the rubies were all
natural, and not even heat-treated, as are nearly all mined rubies!
Synthetic rubies, rightly so, go for an enormous discount off high
quality untreated naturals---over 98%! More roaches in the cornmeal,
like the gemologist at another store who told me a 1.34 carat diamond
was totally eye clean, when I easily spotted a dark inclusion on the
pavilion between the prongs. Speaking of diamonds, I hope you haven't
invested in them versus silver---your results are likely to be pathetic
unless you found some super resource stock.
WEEVILS IN THE FLOUR & SUCKER BAIT
I trust you didn't commit the profit-neutralizing mistake of viewing a
purchase of sterling tableware or collectables as a silver investment.
On a lesser scale, some people failed to take advantage of the sales tax
abatement for spending $1,000 and up on precious metals per transaction.
They have added weevils to their flour. Back in 2000 when a lot of
companies were offering 1 ounce silver rounds along with remitting
payment for charges owed, the asking price for such coins ranged up to
$39.95 per coin. A fellow I discussed silver with showed me an offering
for $39.95. I explained why that was sucker bait. Placing colored enamel
on silver coins adds nothing to their metal content value, but some fall
for a gimmicky way of being overcharged.
On a lesser scale, some have made the mistake of not shopping the dealer
market for their 90% coins and bullion. Buy and sell prices of dealers
vary. Some dealers report more buying interest when the silver price has
been below $4.50; others notice more sales when the price has been
closer to $5. Unfortunately for many investors, the only time they're
motivated to take action is when they see a rising price. Without
objective validation of rising prices, they are paralyzed by
indecisiveness. The same applies if they're buying shares, except in the
case of shares, they may have half as many shares as they could have by
buying on chart dips because they were only energized to buy in a
sharply rising price environment.
$10,000 in a certain silver share last summer would only have gotten
half as many shares as several weeks after that, and less than half what
they could have had in April. With three $1,000 face value 90% bags, the
same timing might result in $500 more expense. Timing is therefore of
much importance and the psychology of acting only on rising prices is
amusing to smarter investors, especially when it's the same kind of
people who try to catch a supermarket sale of a $1 item for 79 cents.
Then comes the other end of the tunnel---the time to sell, to take some
profits. This will be the subject of another commentary and possibly
subscription-based advice. But selling too early, in silver, will prove
more of a risk than selling too late, because the only thing which will
finally alleviate the coming years of shortages, will be ocean
mining---at much higher expense than any silver user wants to think
about. As unpleasant for them as the old British sea custom of
keelhauling!
ROACHES CARRYING OFF THE CORNMEAL
Now that you have your silver holdings, for which hopefully you have
paid competitive rates and bought in a timely manner on price declines
given to you by the COMEX shorts, you must be careful to not let vermin
make off with your valuables. A true story from my boyhood will
illustrate a point. I was at a washateria in spring 1965 with an older
relative. I took keen notice of the new clad quarters, halves and dimes.
With instinct equal to that of any animal in the wild, I---an eleven
year old boy--- understood full well that we needed to take all possible
action to secure as many of the then still circulating silver coins as
possible. Unfortunately I was under the supervision of the older, and
less sagacious, relative, who assured me that the new coins would
operate the machines just as well.
Yeah, and a skateboard will get you a mile down the road just as well as
a Rolls Royce! My suggestion was overruled, and I was chagrined at the
stupidity so brazenly on display. I nearly cried watching all those
silver coins slipping away, and the new bastardized coins being treated
with equal reverence by fools. However, that summer I went with my
parents to a job related convention in Amarillo, Texas, having saved $30
in allowance and being given an extra $20 to amuse myself with while my
parents were tending to their business. I was told to go see as many
movies as time allowed. I did go to the movies, but stopped at the
ticket booths, where I asked to trade dollar bills for Mercury dimes. I
was never denied, and I also recall finishing my business at a vending
company after visiting several gas stations.
I returned home with 500 Mercury dimes, and no cull coins among them.
All had gone well, but a turn for the worse sadly awaited. I will tell
you of my misfortune in that episode, to convey a principle you need to
adopt if you haven't already done so. I was understandably proud of my
Mercury collection, and showed those dimes, so clearly superior to the
new clad dimes, to kids in my neighborhood. It seems you need never look
far for someone willing to obtain things without honest effort. The
next-door neighbors were freeloaders and left owing three months rent to
the preacher who owned the house. Also, their corrupt riff-raff son took
opportunity to enter our dwelling while we were away at church, found my
Mercuries, and stole them. Naturally they left no forwarding address.
That event crushed my spirit!
LOWLIFES WANT SOMETHING FOR FREE
So I've said that to say this---don't boast to neighbors, friends,
relatives or acquaintances about your silver holdings. You never know
who will be tempted, or that they in turn will unwittingly pass along
the details to the unprincipled. As for concealing your metal, do so.
Don't make it easy for a thief to steal from you. I suggest a take off
on the old Japanese warrior strategy called "hiding behind the light."
If you're looking at a spotlight at night, you cannot see what's behind
it, understand the concept? Perhaps the inside of a wall or the hollow
inside of a bathtub frame might be suitable, or an off the premises
location. The next issue is, when going to buy more, or to sell, take
care who may be watching. Look right, left, behind, and not only
straight ahead.
As with silver deposits where some lead occurs, maybe you should have
something containing lead with you, as long as you do so lawfully. There
are potential hazards, be assured! There was a rash of robberies of
dealers and salespeople in the diamond and colored stone trade in years
past, in which Columbian drug associated gangs would identify vehicles
driven by those carrying valuable loads at trade shows and gem and
jewelry exhibitions. The thugs would cut slits on the sides of tires,
such that after being driven for a few miles or hitting a slight bump,
the tires would deflate suddenly; whereupon the driver stopped, and the
thieves, who were following close behind, made their robbery away from
the trade show.
I know a dealer who was followed to his motel room once in Houston, and
robbed at gunpoint of an investment grade 3-carat diamond. The same
dealer had another type of thief attempt a distraction theft in his
store by swallowing a large diamond. The con man had to be taken to the
police station and fed bran for 3 days. Do take all possible precautions
to prevent roaches from carrying off your cornmeal! When you leave an
establishment after buying or selling metal, make sure you're not being
followed by someone who wants to ascertain where you live. You can do so
by making an unpredictable, sudden turn and taking an out of the way
route. Make several turns to see that a roach isn't following the scent
of your "cornmeal!"
SILVER AT $4.50 TO CEASE EXISTING
The now Republican controlled Senate is making noises about eliminating
capital gains tax on stocks, possibly the 28% tax rate on collectibles
sold at a profit will also be repealed. This brings us to the matter of
availability of silver investments at the low prices that have prevailed
for so many years. Silver shares may tighten up as to sellers being
hesitant to sell, not only for fear of being shut out of the rally of
the century, but due to waiting to sell till after the capital gains tax
is set aside. It may take several months to see that enacted.
Meantime, reports of tight physical silver availability at the retail
investor level are common, with buyers seeking metal but sellers holding
back. Anyone who listens to voices like Butler won't want to sell in
this environment. As the small to intermediate size dealers are depleted
of inventory, this adds more pressure on larger dealers to acquire
inventory; again, in an environment in which most holders don't want to
disinvest.
With more money chasing smaller amounts of silver, silver becoming
difficult to find locally and the price still not rallying, we stand
shaking our heads at the spectacle of derivatives suppressing the
price---and our Congress and media ignoring the issue. The silver and
gold investing public isn't on a "just in time" delivery system, they
are accumulators. Many industrial users will soon wish they had
accumulated silver reserves, and their management should be sued by
shareholders for not looking out for their interests, and by labor
lawyers for not protecting jobs. Why worry about roaches in the cornmeal
when there isn't any, and you're starving? Viva silver and the other
noble metals!
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