The Michael Fuljenz Metals Market Report: November 2012, Week 2 Edition

Gold rose rapidly on election day, staging its single best day since September 13. The stock market also rose, at a slower pace. On the morning after the election, however, gold was flat and stocks fell sharply. The stock market apparently does not like the Obama victory, while the gold market is more positive. Gold opened up $10 to $1730 on Wednesday morning but then consolidated its gains around the $1720 area. The theory is that, with an Obama win, Ben Bernanke will be re-appointed (in early 2014), freeing him to continue his expansive monetary policies at the Federal Reserve for the next four years.

Year-to-date, gold is still on pace for its 12th straight annual gain. Gold (+9.1% year to date) is leading the Dow (+5.8%), while silver (+13.2%) is leading the S&P 500 (+10.9%) and NASDAQ (+12.7%).

The Future

In the New Orleans political panel two weeks ago, CNBC commentator Rick Santelli joked that an Obama win would be positive for the forestry business, since Ben Bernanke will retain his job and "tear down more trees to print more money, pushing lumber futures higher." All humor aside, we can expect the precious metals to rise in the next four years as Ben Bernanke continues to create new fiat money.

In the last four years (since August, 2008), the M1 money supply, now called the "U.S. Narrow Money Supply" (including physical currency and demand deposits, or checking accounts) has increased by 73%, or more than $1 trillion, rising from less than $1.4 trillion in 2008 to $2.4 trillion today. If we continue to water down the money supply at this rate in the next four years, the Fed will create another $1+ trillion.

As former Vice Presidential Candidate Sarah Palin said at the recent New Orleans Investment conference, "If your two children are hungry and you only have one glass of milk left, can you give each of them a full glass of milk by watering down the milk 50%, creating two full glasses of milk? No, you still have just one glass of milk. The Federal Reserve is watering down our money, making it less 'nutritious.'"

The Fed said on October 24 that it will maintain $40 billion in monthly purchases of mortgage debt and hold interest rates near zero until mid-2015. With Obama's victory, we now know that this policy will continue until at least mid-2015 and probably later. Now, the President needs to address the "fiscal cliff" of tax increases and automatic budget cuts (including military budget cuts) that will strike on January 1, 2013 if Congress and the President refuse to cooperate – which has been their pattern since early 2011.

Anne-Laure Tremblay, a precious-metals strategist at BNP Paribas, said, "The expansion of [the Fed's] balance sheet will be supportive for gold." Tremblay added that "Gold tends to be supported by mild risk aversion or mild uncertainty." She explained: "If it looks like we're going to get a last-minute deal...by the end of the year, you could see mild support, using gold as a safe haven because they're worried about the effect on the dollar but not panicking and thinking no deal will be reached and there will be fiscal tightening next year." BNP Paribas has a "positive view" on gold for the next three months, Tremblay said. Near term, she said, "We think the next step will be for gold to re-test the $1,800 resistance level."

Many other analysts agree – the solution to the "fiscal cliff" could be gold's next engine for growth. In all likelihood, Congress will stall until the last moment and then only "patch" the problem, short-term.

Gold has already doubled during Obama's first term. On the day before he was first elected in November of 2008, gold traded at $729.50. Gold doubled by early 2011 and soared to over $1900 in September of 2011. Can gold double again in Obama's second term? Probably so!

Putting Your Children And Grandchildren Through College With Rare Coins - A True Story

College tuition costs at the best schools are astronomical. Even four years at a state university will set you back a pretty penny. If you have young children, by the time they're ready for college, the costs will be beyond astronomical.

People have different strategies for building a college education nest egg for their kids. But a friend of mine - I'll call him "Mr. B" - hit on an inventive and very profitable way to build a college fund for his youngsters. Mr. B is a prominent fellow numismatist and coin dealer who has held numerous influential positions in national coin industry groups. I was impressed with his creative college savings plan, and I think his story is worth sharing with you.

Mr. B's first two children, a girl and a boy, were born in the late 60s and early 70s. Mr. B launched his plan right away to be ready financially for their higher education.

Every year he bought $1,000 of well-known companies' stocks for each kid. He stuck to the axiom of "invest in what you know" and bought companies that affected his children's lives, like Johnson & Johnson (because they make baby powder and no-tears shampoo). As they grew out of the toddler stage, he bought companies like toymaker Mattel and, of course, Disney. When they were teens, he bought consumer product companies like Coca-Cola.

Now, here's the unusual part of Mr. B's strategy. In addition to building a stock portfolio for each child every year, he also invested $1,000 in high-quality U.S. gold and silver coins for each of them.

He chose only gem uncirculated or proof coins that were 50 to 150 years old. He completed a U.S. gold coin type set for each child. He also enhanced their coin portfolios with many gem-quality silver coins.

Mr. B told me that his plan of investing in stocks and coins became much more than just a prudent financial exercise. "It was a bonding experience," he said. "It brought us closer together as a family while instilling in my children valuable life skills." The kids got excited when annual reports came out, which Mr. B read with them, so they could see how the companies they owned were doing. They followed the stock charts of their portfolios and even went to shareholder meetings. The kids became absorbed in the history of the coins in their portfolios and avidly dug into reading and learning about them - which paid extra dividends later on when they got outstanding grades in college history courses.

Mr. B was able to finance the two children's educations by selling the stock and coin portfolios. Adding it all up, he noted that the money he invested in coins paid off far better than the money he put into stocks.

Here's how the actual performance numbers worked out. Investing $1,000 in stocks and $1,000 in high quality gold and silver coins for each child each year for 18 years yielded these results:

First Child:

• 18-year $18,000 investment in stocks: $40,500 profit, 225% growth
• 18-year $18,000 investment in high quality U.S. coins: $68,000 profit, 377% growth

Second Child:

• 18-year $18,000 investment in stocks: $38,000 profit, 211% growth
• 18-year $18,000 investment in high quality U.S. coins: $77,500 profit, 430% growth

Aggregate:

• Stocks: Original investment $36,000 ($18,000 x 2), $78,500 profit, 218% growth
• Coins: Original investment $36,000 ($18,000 x 2), $145,500 profit, 404% growth

Many people put cash away in CDs or money market accounts in anticipation of their children's college days. But the meager interest being paid on these accounts against the rapid debasing of the U.S. dollar - and pretty much all world currencies - sucks purchasing power out of the nest egg rather than growing its value. Mr. B's college coin savings plan, on the other hand, paid off with handsome growth.

Investing for Your Children and Grandchildren

We offer parents and grandparents of future college students the opportunity to invest regularly in high-quality mint-state rare gold coins through a strategy developed by America's Gold Expert and Award-Winning rare coin expert, Mike Fuljenz. Through an accumulation plan that we personally outline according to your circumstances and needs, our strategy could provide you with a systematic, smart long-term way to build the resources you need to send the children you love to college.

Please contact your Account Representative for more details.

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