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Why we’re nowhere near the mania phase in precious metals

lucky

May 24, 2012
Lake Tahoe, USA

Yesterday was my lucky day.

Tahoe1 300x200 Why were nowhere near the mania phase in precious metalsWhile hiking in the middle of nowhere around Lake Tahoe, I literally stumbled onto a 1-ounce US silver eagle coin, 1996 issue. It was just lying there on the ground without a soul in sight.

lucky1 300x200 Why were nowhere near the mania phase in precious metalsThe coin was pretty muddy, but I managed to clean it off later with an old toothbrush and some elbow grease… at which point I decided to take my good fortune on the road for a little unscientific poll.

I’ve traveled to plenty of countries where the local population is very in tune with the prices of gold and silver, particularly in Asia, India, and the Middle East. It’s simply part of the culture.

In the developed world, however, people have much greater confidence in their paper currencies because they’ve been brainwashed since birth to believe their currencies are sound.

As such, I was not surprised by the results of my little informal survey.

Walking around the lakefront resort community where I’m staying, I stopped passers-by and explained to them how I had found this coin. Then I’d ask, “What do you think it’s worth?”

The first person I showed it to held it in his hand and felt the coin’s heavy weight with a slight tick of his eyebrow. Then he flipped it over to the reverse side, saw the “1 OZ. FINE SILVER- ONE DOLLAR” marking at the bottom, and replied, “Uh, a dollar…”

One after another, locals, tourists, and staff alike were completely mystified at the prospect of my weighty silver coin having much ‘value’.

Several people commented on the coins year, claiming, “Well it’s probably not worth much, maybe just a dollar, because it’s only from 1996… I mean, if it were from the 1950s, then you might have something…”

Another common response was “I have no earthly idea.” After half a dozen of those, I changed my approach and walked into one of the local casinos where I saw three bored dealers at an empty blackjack table.

I plunked my coin on the table and asked, “How many chips will you give me for this?”

Each one of them examined the coin and looked at each other in silent conference before one of them said, “$1.”

I asked a few other folks milling around the lobby if they’d give me $5 or $10 for the coin, which seemed to offend people much more than spark their curiosity for the opportunity.

Finally I met a man and his wife who were walking their dog on the beach nearby; I walked up to them and said, “You look like intelligent people, maybe you can help me out… see I found this coin during a hike today and have no idea if it’s worth anything. What do you think?”

The man took the coin and noticed it was silver; he said, “Oh, this is silver… it’s probably worth something. You should SELL IT!”

Great. I finally find someone who actually seemed aware of precious metals’ value, and his initial reaction is to trade it for paper
currency.

Like I said, I can’t really say I’m surprised. Even here in this wealthy resort area filled with educated, successful people, nobody really had a clue. Western governments inculcate such mindless devotion to their paper currencies, I suppose it’s a hard mindset to break.

But as unscientific as my informal poll may have been, it does suggest one obvious conclusion: we are nowhere near the mania phase for precious metals… and any talk of a gold ‘bubble’ is complete nonsense.

The current pullback is just that– a pullback. Like we saw in 2008, institutional money managers are locking in their profits as they cash up and prepare to take heavy losses over the euro crisis.

Gold and silver’s real breakout will be when the average, everyday guy has signed up to receive gold price SMS alerts to his smart phone and has the local coin dealer on speed dial.

Just like the real estate bubble in the early 2000s when every Tom, Dick, and Harry was flipping off-plan condos in Miami, precious metals will enter bubble territory when the masses get into the market.

It may be a bumpy ride for precious metals as the euro crisis continues to unfold… but it’s clear that we’re a long way off from the Joe Six-Pack mania phase.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • http://twitter.com/MichaelPorfirio Michael Mason

    I think “Joe Six-Pack” is too broke to worry about it.

    He is probably more concerned with how he is going to get his next six pack.

    - MPM

    • Mark Odom

      You’re so right Michael; 2/3′s of the American population don’t have a thousand dollars in cash and/or credit!   I discussed with an elderly lady friend of mine that she might want to look into getting some gold/silver bullion.  Six years has gone by and she hasn’t discussed it with her son yet!  She deserves the coming disaster!  Won’t do one thing to help herself.  How can you feel sorry for someone like this?  I don’t!  Sorry~!

    • http://www.bzemic.com/impossibleInstinct/ steve ward

      yep that most likely the cause of the odd response, I want to say $30 but i dont know how much sliver is really in the coin?

  • David

    I find those reactions believable but sad. The old saying “hope for the best but prepare for the worst” is a very old statement. Currency is rapidly being created with nothing backing it but an insolvent government. That is and always has been very inflationary. Cash and most dollar-based investments are being eaten alive by inflation, which is way higher that government statistics. A super-majority of the population is wholly unprepared for the changes that are coming, even if they were just inflation. Unfortunately they will be much further reaching than that alone.

  • http://www.PeteSisco.com/ Pete Sisco

    Congratulations on designing an informal study in an afternoon that has more insight than what five television networks or a million-dollar government study would provide. And I gotta say that, as cynical as I am, I’m shocked that nobody you spoke to had a clue that an ounce of silver is worth more than a buck. Wow! The mind boggles. 

  • George

    Another silver dollar survey: the first 3 minutes is interesting: http://www.youtube.com/watch?feature=player_embedded&v=KRmSl9ZomJ8#!

  • Cafeajm

    Paper money is for playing the game. When off the board, you need real, hard assets. Anything with a number on it (denomination) is just transient. Silver’s value is derived from its multiple uses. It had a history as money as well as industrial and jewelry.

    • StuckInUK4Now

      “Anything with a number on it (denomination) is just transient.”

      Too true! The latest nation to learn this the hard way is of course Zimbabwe. When I visited Zimbabwe in 2001 I exchanged a US $50 bill for local currency, which came to 6000 Zimbabwe dollars. As their largest banknote at the time was 100 dollars, that meant sixty banknotes! I couldn’t fold my wallet shut – until later, when I’d paid 795 dollars for dinner…

      Then, in August 2008, they had a currency revaluation which knocked several zeroes off the denomination, leading to the issue of a one dollar (Z$1) banknote for the first time in years. Just five-and-a-half months later, in January 2009, they had to issue a one-hundred-trillion (Z$100,000,000,000,000) bank note. Not long after that, they abandoned their own currency altogether and adopted the US dollar as their official currency.

      Never mind using a silver coin to get people to break the habit of a lifetime and start thinking – try using a one-dollar and a one-hundred-trillion dollar banknote from Zimbabwe and telling people they were issued less than six months apart. (There are lots for sale on eBay – just type in Zimbabwe 100 trillion).

      Enlightenment? Light bulb moment? Sadly, no – the usual reaction is something like ‘Well, Zimbabwe’s run by a lunatic anyway - it couldn’t happen here like that.’

  • Mark Odom

    First of all, two thirds of the country doesn’t have a thousand dollars in cash and/or credit; they’re merely existing from pay day/check day to pay day.  The other one third are virtually clueless as to the value of gold/silver and that they’re metals of the rich!  We’re fed this myth ‘sound as a dollar’ crap day in and day out.  They’re sheep!  They’re going to be slaughtered.  I have an elderly lady friend I keep up with.  She won’t pay a minute’s attention to me on metals.  It’s beyond her realm of thinking!  She’s totally ruined when this thing comes down!  And, I might add, she deserves it!  I tried to reason with her on every level and she won’t budge and buy even a single coin.  ”I’ll talk to my son sometime later and see what he thinks.”  It’s been years and she ain’t had the conversation with him and won’t ever!  Could care less as long as the bills are paid and she isn’t bothered.  Her favorite pass time is watching TV and sucking on her bottles of Coca Cola!   FACT!

    • http://pulse.yahoo.com/_YF2QG6URUDV7QOQ2QCSZ3OSA7Y P L

      Mark, I agree with you….as a matter of fact we are part of that two thirds.  You know how they say women never listen to their husbands?  Well I am very proud I did.  About 4-5 years ago, we had a little money and my husband wanted to buy 500 silver eagles with it.  I agreed and since then we have been adding to every time we can. 

      Mostly as we can..from 2 to 10.  We are not selling ANY of them because we don’t see the dollar holding up long term…but your post….well your post is right on target.

  • Sm

    I think a random person approached in such a manner would assume it was a scam and a fake, the estimates of the value of the coin given are more informative of public attitudes.

    But here’s the thing about the whole fiat currency, and concerns about how it could all be devalued and wiped out by more money being created by fiat. If it’s so much in danger of losing its value, why are interest rates so incredibly low?

    • jpbrown

      Quantitative Easing=Zero Interest Rate Policy ; ZIRP

    • Davewill

      The answer to that qustion has a lot to do with the story just reported.  If it’s in so much daner of losing its value why are rates so low?  If silver is worth so much (aprrox. $28 today) why is it valued so little ($1 to most of those people)?  The same holds true to your question the monetary balance sheet has exploded (See QE & QE2) yet the masses stampede to the dollar as a safe haven (Record low interest rates).  To sum up my answer to your question is with a question of my own.  What is the difference between Perception and Reality?

  • Mmedinayu

    1oz american silver eagle(.999 fine) is worth around $32( spot+$3.50).  but, when u sell it back to the coin dealers, only giving u $1 over spot.

  • mile davis

    I think this story is a crock of shit!

    • I cannot abide useless people

      Very helpful reply. Nothing to add value to the story like noting that 1996 Silver Eagles are the lowest mintage of all the years these have been produced.

  • http://www.philmug.ph/ Ryan

    Haha great article. This reminded me of that Youtube video of a fellow named Mark Dice who tried to sell a 1 oz gold coin for 50 USD (that video is two years old so the price 1 oz was probably around 1K USD then) to a bunch of strangers. Same reaction as the people you surveyed. Gold and silver still has a long way to go my friend.

  • Jjohn46

    what would a mania during a depression actually look like?

  • Rmiller

    Right.  Nice fiction here.  Your suposition is probably correct but the story is pure fabrication.

    • Silverfox

      Rmiller, I don’t think you are correct,  I eat out often and I leave 18%.  It’s usually about 10 bucks.  I always ask the server if want the $10 or these four 1964 quarters.  They always have no clue and turn down the $20. tip for the $10.  Amazing.

      • http://www.facebook.com/thenatekelly Nate Kelly

        I wish I could wait on you one day, I always check my change for any pre-1964 silver or 1982 copper pennies. So far, only one person has ever tipped me silver, a dime, and by accident though it was still a nice addition to their tip.

  • charlestonvoice

    On target!

  • charlestonvoice

    Footnote:

    The 1996 date is the KEY for the series having the lowest mintage!

  • Dfran

    If you cleaned off the coin with a toothbrush, later on. Then why is the picture of the nice clean coin still have a nature setting behind it? Love the story, but certainly not true. You don’t really expect people as smart as your readers to believe this, do you?

  • Mike Alter

    Hey Simon I live in Tahoe, If you would of bumped into me, I would offered you a straight trade of 14 pre 65 dimes for your OZ…

  • Robinhood777

    So true Simon, these are great times to buy the physical.  I tell my “roomies” every day that we have a blood bath in the precious metals that this is a great time to get on the phone and buy some cheap!  (robinhood of forextraderoom)  BTW…. Thanks man for all your  great posts I share your site with everyone. You are one of the most on top of it people I have met in a long time. Keep up the good work

  • RUSS SMITH

    Hi!, Patrons Of The Soverign Man Et Al:

        My friends up the street from my place tell me that gold is meant for paving the streets of heaven but weren’t those streets paved centuries ago plus neither is there any gold being sent to any of us directly from heave for any reason at all is there?  They provided no opening by which to influence their closed mind thinking except to say: “For what do we want gold?”
        However, from heaven we’ve been sent some golden ideas especially the one known as the Golden Rule which states that we should do to others exactly what we wish others to do to us   .Wouldn’t that be a great idea for our professional politicians to follow in terms of keeping our money sound and totally FREE from inflating away our purchasing power constantly & consistantly year in and year out raising prices on everything we need to buy including paying our many monthly bills?
        If the past is any picture/prelude of our futures, none of the professional political candidates wanting to be elected President of the US will do unto us what they should regards keeping the purchasing power of our money high will they but instead inflate our purchasing power away, so they can conduct their trade wars with China etc. right?  Then, pray tell me & heaven why we put ourselves into such a position as voters every election year and the years following thereafter?  What good prupose does our votes serve us or OUR country, by allowing the professional politicians to inflate away our meger remaining purchasing power in order for them to pay their bills and debts to foreigners but increasing thereby the burdons of our debts through our resulting loss of purchasing power until?

    RUSS SMITH, CALIFORNIA
    resmith@wcisp.com

  • Charlie

    Ted Butler has long held that what will knock the price of silver permanently higher is an industrial users supply panic.  I agree.  He and I are the only 2 longs ever cited by the Silver Users Association.  While Gold Anti-Trust Action Committee boosts Ted, they slammed me (May 2009 Chris Powell, completely unprovoked, I complimented GATA repeatedly over the years before that jab) and since then have blacked me out.  Before passing judgment on me, read my work in Archives of Silver Investor; and at http://www.silverstealers.net and http://www.nosilvernationalization.org  Afterwards you might want to ask Chris Powell why he feels the facts I present (no one else has done so) aren’t important.  It won’t take the average Joe to send silver higher, but a cluster of corrupt, silver starved corporations.  Because these companies met with Homeland Security in fall 2008 I felt it was time to launch my own sites.  100% free access nonprofit and an attempt to protect YOUR metals ownership rights (an effort in which GATA refuses to participate!)

  • http://pulse.yahoo.com/_JY5PD5WY7KUBVLHVOQ6NF7I4YY Choohader

    I recall accumulating silver for several years when it was only $10-17 and I would think to myself what a joke $10-17 really is.   I mean seriously all it can buy is a 12 pack of beer.    Today, I think to myself, “You know, $28 really isn’t jack sh*t either.”    Facebook is worth more than the entire aboveground pile of silver AND the silver mining sector.    Anyone who thinks silver isn’t a hot (and safe) long term investment is stupid, frankly.

    I’ll trade my silver when it only takes 15-20 ozs to get 1 oz gold, or I will sell it when it buys a tank of gas, a pizza, a case of beer, box of cigars, and still money left over to go to the movies.  LOL

    • jpbrown

      Another ratio to watch is the Dow:Silver ratio.In Jan. 1980,that ratio got down to 16:1. 16ozs of silver would buy 1 unit of the Dow Jones Industrial Ave.In Mar. 2000 the Dow:Silver ratio hit 2600:1.Today that ratio stands at 440:1.Could it be on it`s way to below 20:1 again?

  • Dale Holmgren

    Rather than being sad at our neighbors’ ignorance, we should eagerly take this opportunity to buy as much as we can at this low price.  I’ll be happy to sell it to them later when its purchasing power power increases.  This is no different than Warren Buffett and his famously schizophrenic “Mr. Market” metaphor, who will crazily demand a price far above fair value on one day, then perhaps a year later ask for only a fraction of the stock’s true value. You have to keep it just that simple.  

  • Slipsanity

    Can I offer a possible scenerio? He found the coin, took it back to where he was staying, and cleaned it. He then returned to the trails and asked people what they thought it was worth and took his pictures……possible? I think so….

  • Dr. Dolittle

    Expecting a bubble shows you still think the dollar value of gold matters,you have not met the mindset yet.

  • Rothschilds

    anyone see ”the masters of money” on youtube? why would normal people worry about the rothschild’s, favourite currency, gold and silver?

  • Toddschmeltz

    Mania phase?  It’s down the schitter!

  • Roscoe P Coaltrain

    Oh, dude, thanks for picking that up for me.I thought I had lost it there forever. I’ll send you my address.

  • Bob

    Or the scrapper!

  • Mayeeden

    Great article.

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