Coin Collecting: More Than Chump Change

Steve McDonald
by Steve McDonald, Bond Strategist

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How does $3.2 million for a single nickel sound? How about a triple in 10 years - the last 10 years?

Believe it or not, in the world of rare coins $1 million plus for a coin is now commonplace. A single 1794 silver dollar went for $10 million. And collectible coins have returned a triple since 2003.

Jeff Garret, a Kentucky-based dealer and investor, said in a Barron’s article that coins are a fantastic investment, and you don’t have to be in even the five-digit range to make money. They have proven repeatedly they are not just for collectors.

You need to take a look back at other investment classes for the past decade to see how impressive this really is.

According to Garret, the 2008 crash has driven coin collecting from a passion to a frenzy. As money poured out of stocks, looking for a more predictable base, it poured into hard assets like coins.

Auction sales have increased twofold in just two years and despite gold’s drop in value, coins still have serious support. This is seen as strong support for coins as an investment, not just a collectible.

The Internet has also been a huge boon for coins. Barron’s says it is the perfect venue for worldwide bidding. Coins are small enough that shipping is no problem with next-day delivery, and insuring them is cheap!

The best way to get started in coins, according to the Barron’s article, is to attend the World’s Fair of Money in Chicago. He thinks this is where you will get an insider’s access to the best of the coin market.

And, no, before you start emailing me, we are not part of, nor do we have any interest in, this show.

Rails Are Paying Up

This is about the fifth segment I have done on railroads, and I like them more now than the first time I mentioned them.

Norfolk Southern (NYSE: NSC), one of my favorites, just made its stockholders $25 million wealthier. It raised the dividend from $0.50 to $0.52 a share.

This is the 12th year in a row it has increased its payout, and it has been paying a dividend since 1901. And, since 2006 it has repurchased 132.6 million shares of the stock. That’s $7.8 billion returned to shareholders.

The big drop in natural gas prices has caused a slowdown in coal shipments that resulted in a 2.5% drop in last quarter’s numbers. The share price is off its 52-week high, down from $81 to about $75, but this is a buying opportunity, not a reason for concern.

Coal appears to have stabilized with the realization that Obama’s plan to shut down coal-fired power plants is unrealistic. And even without coal, I am 100% confident this behemoth of the rails will continue to excel and will be one of the most stockholder-friendly companies on the exchange.

S&P still has it as a buy!

This is one that is doing everything right and you need to take another look at it.

The “Slap in the Face” Award: Bank Blunder

The RBS, Royal Bank of Scotland, gets it this week. It was recently fined for misreporting trades to the regulatory body of the U.K.

Misreporting doesn’t do this one justice. It misreported 44.8 million trades over a four-year period.

44.8 million!

But the size of the error is dwarfed by the pitiful fine imposed.

Remember, the regulatory body in the U.K. relies on accurate reporting from its members to do their job of making sure things are on the up-and-up. So if the bank doesn’t give accurate numbers, it has been essentially unregulated for four years.

The fine for this mammoth stupidity? A whopping $8.7 million! That’s about two minutes of interest on its assets.

And, if that’s not stupid enough, no one has even been punished or reprimanded.

Of course, no one on Wall Street has been charged for any of the violations that resulted in the collapse of our stock market and our economy. The banks and Congress have decided it would have too much of an impact on the economy if they were prosecuted.

Unbelievable!

A word of advice: If the government - any government - requires you to report something, make sure it is accurate. I don’t think you or I will get the same latitude from the U.K. or the U.S.

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