All that glitters

Mike Fuljenz's straight talk on the investment value of gold

With permission from Beaumont Business Journal

Mike Fuljenz, of Beaumont, is not just the head of a thriving gold business with clients throughout the United States- though he certainly is that. The author, broadcaster and teacher is one of the most universally decorated coin experts of the last 30 years. His 2010 book "Indian Gold Coins of the 20th Century" , has quickly become a key resource for those interested in these beautiful collectibles.

From his many appearances on CNBC and Fox News to his Beaumont radio show to his work guiding journalists as they attempt to navigate the Byzantine world of collectible coins and those who traffic in them, he has become a national figure.

"Mike Fuljenz is the nation's No. 1 coin and bullion expert. No one knows physical precious metals better," is how Franklin Sanders, editor of The Moneychanger, put it. A school teacher and later principal before making his mark in the world of numismatics, he has remained committed to children and education. But it is his knowledge of the gold market that prompted the Beaumont Business Journal to make Fuljenz the subject of our second BBJ Interview." -----James Shannon

Glen Beck famously told his listeners to buy gold as a crisis hedge. He said," For those who perhaps don't subscribe to Beck's worst-case scenarios, could you start by making a more rational argument for buying gold?

We have seen unprecedented financial uncertainty in the last decade, with two of the largest stock market crashes in recorded history. First, stocks fell 50 percent from 2000 to 2002 and then they collapsed even more-- 55 percent from 2007 to 2009. Stocks are now lower than they were 10 or 12 years ago. Meanwhile, gold has more than quadrupled in value. Historically, when investors face economic uncertainty, like now, we have usually seen those investors convert at least some of their savings and investments into gold.

Last month, for instance, the University of Texas Investment Management Company invested $500 million in gold, not only as a protection against inflation but, as CEO Bruce Zimmerman pointed out, "even more as a lack of confidence in financial markets due to extraordinary government fiscal and monetary stimulus." Gold has been a storehouse of value since before ancient times. Whenever nations try to substitute un-backed paper for gold or silver, that paper money has usually become worthless over time. That includes our country's first currency, the Continental. We have seen that again recently, with the gradual erosion of the U.S. dollar on world markets, causing the University of Texas to turn to gold.

As for Glenn Beck's comparison of current events to Nazi Germany in the 1930s, I wouldn't say that modern America is anything like Germany in the 1930s. Instead, we are devaluing our currency in a "quiet" way, sometimes with the best of political intentions. Our well-meaning politicians have voted hundreds of billions in "stimulus" funds, but that only serves to devalue the dollar and help gold.

On Beck's programs, his dire predictions often segue seamlessly into a commercial for Goldline, a company selling the gold he tells his listeners to buy. Isn't this a conflict of interest?

It seems to me-- and some others-- that there has been a closer relationship between radio hosts and their advertisers than between the more traditional print and television media and their advertisers. I can see how this closeness between the message and the paid advertiser may be contributing to a blurring of the line between editorial content and advertisers. Of course, this caution relates to many different classes of advertisers, not just advertisers of gold products. I think it goes beyond argument, however, to say that gold deserves a place in nearly every portfolio. On May 3, 2010, a USA Today report showed that in a cross section of 1,144 independent investment advisors, precious metals are now one of the top four candidates for their personal and client portfolios. Gold's value does not depend on Glenn Beck's views.

In recent months, there have been media investigations into companies that come into town and set up at a local hotel to buy scrap jewelry and gold from individuals. It turned out that their claims to pay "top dollar" were false and that in many cases they offered only pennies on the dollar of what the gold is actually worth. How can consumers protect themselves?

You are correct. This is a national scandal. In our view, investors must seek better knowledge in any field before acting. Caveat emptor: buyer- and seller- beware! Always get a second opinion from a respected area dealer- one that is accredited by the Better Business Bureau and can show you that they have respect from their peers both nationally and locally. Remember , you want to know if the buyer is not only honest and fair with you but also is competent to analyze your precious metals, jewelry, and coin portfolio. I have seen honest buyers offer pennies on the dollar due to their incompetence and ignorance.

You are the author of a definitive book on gold coins, specifically U.S. Indian head gold coins. Compare these coins to gold bullion both as collectibles and as a way to invest in gold.

Rare gold coins are only partially connected to their bullion value. The more rare the coin, the less of its content relies on the value of its underlying fold or silver bullion. The rare coins that I write about are appreciated by collectors for their artistry, beauty and history. Classic American Morgan silver dollars or Indian head Eagles, half-Eagles and quarter -Eagles are fascinating pieces of American history. This is also true of coins in other cultures. In ancient times, coins were like the newspapers of the day: their images and symbols provided information about particular governments, their rulers and their policies.

Rare gold coins are purchased by many buyers as collectibles and as investments. Rare gold coins have out performed gold considerably during past bull markets in the 1960s, 1970s, 1980s and 1990s, according to an index of 3,000 coins studied by the Professional Coin Grading Service. For instance, the most famous collector of all time, Louis Eliasberg, assembled a complete collection of U.S. coins and spent less than $400,000. When that collection was sold more than 40 years later, it realized about $55 million.

My research into your company showed that your company's reputation for honest and ethical dealing is not in dispute, but what should potential customers look for in a gold dealer?

Any potential coin customer should look for a dealer that has peer respect for his or her integrity and competency. Ask for their credentials, including proof that respected national , regional or local organizations have honored that dealer both for its quality customer service and for their expertise in their field. Be careful to not give too much weight to simple memberships, as many organizations only require a check and a heartbeat to be able to post their logo. But some organizations, like the Better Business Bureau, are worth checking out as they rate business and can help customers with dispute resolution.

If a consumer invests in gold, whether bullion or rare coins, how liquid is that investment?

Bullion is very liquid. It can be bought or sold quickly and within a narrow buy-sell trading range. You can price the narrow differences between local, regional and national dealers. Bullion and bullion-based modern coins are like a competing currency. When Hurricane Ike hit Beaumont, I was glad that I carried some gold bullion coins with me for that very reason. However, rare coins are somewhat less liquid and more subject to a wider array of bid prices. If you seek the maximum value from your coins, they should usually be offered back to the dealer who sold them to you, or to a major dealer who specializes in those particular coins. Rare coins typically have a larger spread between dealer buy and sell prices than easily obtainable bullion coins, since there is so much expense involved in finding and grading rare coins.

In the case of coins, how are their values determined? How difficult is it to cash in and sell those coins quickly for maximum value?

Values for rare coins are determined by expert collectors and dealers from a variety of industry sources. You can consult auction records, guidebooks, guide sheets and an expert's personal experience. Rare coins can be sold quickly, but I would resist the temptation to accept the first offer. You may get far less than their worth if you don't offer them to a reputable major dealer who is a specialist in such coins.

Your business is based in Southeast Texas but your customers are all across the country. What challenges have you've faced growing your business from well outside a major urban center?

I like cities like Beaumont, Texas and Lake Charles, La., where I grew up, because small cities like those offer more quality-time with family and less commuting time. You feel a part of a community wherever you turn. You can develop more close friends than you could in a large and anonymous urban center. At the same time, I am only about an hour from seeing the Houston Astros or Rockets play! Beaumont to me is like the story of the three bears. It's "not too small, not too large, but just right." It is great that we have a fine home town university, Lamar, from which we can recruit graduates for our business. As you can imagine, it is sometimes difficult to recruit talent from outside the area to consider Beaumont for work. I love Beaumont and don't miss the multi-hour commute when I worked in Houston.