"Fade" The Little Guy For Profit! - Bill Holter

by Bill Holter, JS Mineset:

As many of you know, I worked in the brokerage industry as a stockbroker/branch manager for 23 years. During that time and the 10+ years since, I have seen the “herd” move(d) violently in tandem many times. For years, smart investors would discern what retail investors were doing as a group and do the opposite quite profitably. It has been said and I have to agree, “the little guy is almost always wrong, and wrong at the wrong time”. Fade the little guy, it is usually quite profitable!

We are again seeing this phenomenon as evidenced by the VIX trading at all time lows and huge capital betting on continued non volatility. This thought process has obviously been aided and abetted by central bank’s massive liquidity flows and “official” purchases of anything and everything to support amarkets. Just to point out, it is not so much the fault today of market participants as it is central banks for “fooling” them into their complacency.

Another area where we can see public action is with official mint sales of coins. Zerohedge recently wrote about this here;

The public has largely shunned purchasing metals since Feb/March of this year after 18 months of very strong appetite

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The above chart is only half of the story because it relates only to retail demand as opposed to “supply” (selling) in the retail space. (Before going any further, please do not panic as what I am talking about is “retail” as opposed to institutional or even sovereign demand, which has remained strong. And rest assured, the little guy buying retail lots will never determine the market but more on this in a moment).

What has actually happened this year is something we have NEVER seen before, the little guy has not only backed away from purchasing coin, they have actually been sellers unlike never before. It is hard to say “why” but I have a couple of suspicions. First, “burnout”. People have watched as stocks/ bonds/real estate have continually inflated since 2013 while gold and silver prices have been suppressed. (This is a topic already covered extensively by GATA and others, if you don’t believe metals prices have been suppressed, I have some ocean front property in Arizona for you.)

Basically, the little guy has gotten “tired” of waiting, in this sense the central banks have won by holding an exploding system together longer than the average investor can wait. Obviously another factor is “the other pasture”, it is hard for people to watch markets go higher and not be on board. Never mind interest rates at 5,000 year lows or stocks and real estate priced at all time high multiples of cash flow, earnings etc. We even see “air” trading at $4,900!

The mass retail selling has done what one would suppose, coin premiums have sunk to all time lows. This has however created an incredible opportunity! You can now purchase AU Liberties (almost uncirculated 1933 and earlier gold coins) for LESS than current 2017 Eagles. Not only that, the premiums for higher grade “uncirculated” coins in the MS 61-MS 63 grade range are such that pricing is roughly equal to or only slightly higher than one ounce Gold Eagle prices. The anomaly is so severe, even when sourcing 1/4 and 1/2 ounce Liberties, there is little to NO PREMIUM over the one ounce coins! At this point, 1/4 and 1/2 ounce Liberties can be purchased at 5% and larger discounts to their same weight American Eagle counterparts. This makes no sense and has never happened before but it is in fact the case currently.

To put this in perspective, Liberties were being “bid” (what dealers were paying customers) 60%-70% OVER spot back in 2009. Higher graded uncirculated coins were being bid even higher. The fear back then was president Obama would lead a charge of gold confiscation. Capital moved away from bullion and into these numismatics as an effort to cover from confiscation. The thought process was, and I believe rightly so, pre 1933 coins would be considered your “coin collection” rather than current bullion subject to confiscation. The best thing to have done then was turn numismatics into 60% more bullion, the situation is reversed today.

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