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Crashing stocks send gold to record high above $1,700

Oil slips as global meltdown threatens to spiral out of control.

As I sit at my computer at 11:20 pm here in Sonoma, California, gold is now trading at $1,715 and silver at $40.25. The world market is taking notice of the US debt downgrade. The Chinese have a curse, “May you live in interesting times.” That phrase sums up an awful lot these days!

As most of you know by now, my father is off working on another project for the next 3 weeks. This will be my first attempt at writing the daily newsletter, and I will do my very best to bridge the gap until he returns.

Competing in sports has always been my passion.  Amongst other things, playing team sports has taught me to use my peripheral vision.  Peripheral vision is the ability to see around the “edges,” beyond your central vision. Ever heard of the no look pass? Great basketball players can make a crisp pass to a teammate in one direction, while looking in the other. Having great peripheral vision is not just important in sports, but being able to see around obstacles is hugely important in investing and in business as well.

In addition to good peripheral vision, successful athletes have great anticipation.  Great baseball players always expect the ball to be hit to them, and great chess players think several moves ahead, while concentrating mostly on the plausible moves at hand.

Do you see the parallel between success in sports, and success in investing? In both, it is important to see the big picture.  In both, it is important to keep focused on the plausible moves at hand, while being cognizant of the next few moves ahead.  In both, it is important to anticipate the volatility, while not losing sight of the goal. And in both, it is important to be aware of, but not become distracted by the noise in your peripheral sight.

Don’t be worried about another correction in the great gold bull market.  Hold on tight.  The gold bull will try to shake you off his back as he has tried to do for the last decade.   All investments are subject to corrections, and gold is certainly no exception.  The trick is to hold onto your position, and don’t get thrown from the bull’s back in the midst of a sharp correction.  The primary trend of gold is up, and as time passes, investors worldwide will become increasingly worried about the worth of paper money.  As this happens, people will opt for the safety of time tested real money, gold and silver. Trust your gut and use every pullback as an opportunity to get longer gold!

I just returned from the Agora conference last week in Vancouver. It was almost exactly one year ago today, that I wrote the following contributing article to the daily newsletter. I received so many comments on it that I feel it is appropriate to include it today for those who were not with us 1 year ago:

One of the many contradictions of the US Government is the legal tender status of precious metals coins issued by the US Mint.

The American Gold Buffalo is my favorite gold coin.  Yesterday, I purchased a proof Buffalo from a local client who stopped in the office.  Proof coins are the more costly collector version of the “commercial strike” coins that we sell every day. They are shinier, and they come packaged in a blue velvet box with a Certificate of Authenticity. Because of the higher cost, I only own a handful of the proofs, but I am a sucker for the Buffalo, so I purchased it for myself.

The certificate that comes packaged with the coin has a passage that reads, “The Presidential $1 coin Act of 2005 requires the United States Mint to strike and issue one ounce .9999 fine, gold bullion coins.  Each coin is legal tender and has a face value of $50.”

Related to that, when I came back into the United States from Vancouver Canada last month, I was carrying 75 Gold Buffalos worth well over $100,000.  Upon asking, I was told by a United States Customs Senior Supervisor, that because the “legal tender” face value of the coins was only $3,750 (75 x $50), I did not have to report them on the customs and immigration form. In other words, when traveling between the United States and Canada, recognized legal tender gold coins such as the US Buffalo and Eagle, the Canadian Maple Leaf, the Austrian Philharmonic, and the Australian Kangaroo are valued for their legal tender face value, not the intrinsic gold value they sell for. The one-ounce American Eagle and Buffalo carry a $50 face value, so does the Canadian Maple Leaf and Australian Kangaroo.  The Austrian Philharmonic bears a 150 Euro denomination. This means that in any of these countries, if you were crazy enough, you could spend your coins for their respective face value amounts.  It also means that for the purpose of travel between the US and Canada, the face value of the coin is the value that needs to be considered when determining if you are carrying more than the reportable threshold limit of $10,000.  Don’t forget about the exchange rate.  If you were carrying enough gold it could matter. In other words, by their own admission legal tender gold coins are currency, and are considered legal tender for the purposes of international travel.

Shockingly, the IRS must not have gotten this memo. Even though the United States Customs calls US minted gold coins legal tender, the IRS taxes you at the 28% collectables rate when you switch your gold dollars for paper dollars.

If your paper dollars rise in international value, and you switch said dollars for another paper currency making a profit, those profits are then taxed as capital gains.  The question I have then is, “Why aren’t dollars treated by the IRS as collectibles?” Go figure!

By the way, South African Krugerrnads have no legal tender face value, so when traveling with them they will be valued only by their intrinsic gold value.

Ex-Obama Adviser Christina Romer Says U.S. is ‘Pretty Darn F**ked’ (Huffington Post)

On the same night that Standard and Poor’s downgraded the United States’ top-level credit rating for the first time in history, Christina Romer, former chair of Obama’s Council of Economic Advisers, didn’t mince words when asked of downgrade’s potential consequences. (h/t NewsBusters)

The U.S. is “pretty darn f**ked,” Romer said during a segment on Real Time with Bill Maher called “How F**ked Are We?”, after Maher asked what the new could mean for the U.S. economy.

“I’ve been hanging around [Treasury Secretary] Tim Geithner too long,” Romer said, explaining her foul language. Geithner, she says, swears “like a seventh grade boy.”

Read the Full article.