Robert Mish: Front-Line Evidence That We are Nowhere Near a Gold Bubble
Chris Martenson: Hello, this is Chris Martenson of PeakProsperity.com with another podcast and today I am on the road. I happen to be in Menlo Park California, I am at Mish International Monetary Incorporated, I am with Robert Mish today, and this is going to be a really good interview. I was here in Menlo Park two or three months ago and we were talking with Robert about the coin market and gold markets and this is somebody who is on the front lines of this business selling, dealing, buying rare coins, numismatic coins, precious metals, gold, silver, you name it. With that frontline view he has an extraordinary perspective because he gets to see who is coming in, who is buying, who is selling, there are some really interesting stories there. But as well, he has been in business for 49 years, so he was here and has seen a lot and has been paying attention, particularly during the gold bubble one as it was, back in 1980 and I am really looking forward to capturing some perspective. So Robert it is a real pleasure to have you today.
Robert Mish: Thank you for stopping by.
Chris Martenson: So tell us about your business a little bit, give people some background on whom you are, 49 years, 49 years in this one spot doing what you do.
Robert Mish: Almost, it actually started out when I was a child, I had a fascination with the subject matters that all coins bring to life and that is history, geography, economics, art and culture. And I learned far more from the subject matters from coins than I ever did in the classroom. I was playing with coins after school and it grew into a business, one that started actually started with removing old coins from circulation at a time when we had old coins in circulation because the silver coins are still in circulation. That was quite a windfall for a 14, 15-year-old kid who can buy his first mustang when he turned 16. So I was hooked and first it was selling to collectors, and then the business began to change as we went through the removal of silver from our coinage and we all became silver dealers, silver certificates. The one-dollar bill that you could redeem for silver or retired from circulation when the government reneged on their promise to redeem them for silver in 1968. Well we were buying and selling silver certificates, eventually we went through the silver and gold bull market of the 1970’s as people who moved to protect themselves from that big inflation at that time period.
Chris Martenson: You know I had that passion as a kid, I collected coins and I used to, this was my business such as it was when I was in my early teens. I would go down to the bank and I would buy as many quarters as I could in rolls and I would fish through them and you could still find one or two silvers ever so often in them and then I would replace the quarters and just go back and I just kept swapping them. So I was buying silver quarters for a quarter and eventually stacked all those up and I actually sold my silver at forty dollars in 1979, right when it was going up and I felt bad about missing the fifty dollar peaks. So that was my first entrée into this business as well I guess was I hoarded silver, somehow intuitively as a kid and then sold into the first spike. I am really interested, so you were in business in this store in that ’79, ’80 period?
Robert Mish: Not in this store, we were in San Mateo at the time. We opened this store in 1981 with the windfall from those times in the business.
Chris Martenson: So I want to find out about those times, so take us through, it is 1979, silver is really starting to spike, gold is starting to go up and I guess they both peaked out somewhere in the January 1980 timeframe. What was it like, first of all start us out as this is building, gold had ramped up for a while and then fallen by 50% and then started its parabolic climb. What was the mood like? How many people were actually buying and selling gold and silver?
Robert Mish: Very, very few, it was really a spinoff of coin collecting. Suddenly people who had collected coins found that they had collections that were worth far more than they paid for them because of the gold and silver going up a lot. Back then, we did not have a lot of mint ready products for people to buy. If you wanted to go invest in gold, the only coin out up to 1979 for gold investing was the Krugerrand. If you wanted to invest in silver, you just took the old US coins in circulation, there was very little modern mint product around, very little refiner product around and the refiners, they were caught by surprise. Today if we want to invest in pure silver, we can buy ten ounce, hundred ounce, or a thousand ounce silver bars. Back then, there was not much of that around, so we were selling just about anything made of silver to the new silver investors, coins that would not normally be thought of as a way to invest in silver. The demand got to big that our collector inventories got sold down to all the new investors who were just looking for any kind of gold kind, any kind of silver coin. I remember one day we ran out of krugerrand and US twenty dollar gold pieces and the customers said, give me anything, give me a coin, and I said well, I got this coin from brazil and I got some gold coins from Greece and a few old things from Sweden. They would buy it; they did not care because there was a shortage of consumer ready product. Today we have the consumer ready product but that is going to get overwhelmed too.
Chris Martenson: So people are coming in, they are buying whatever they can. Some people are selling, I was selling to that a little bit, what was that like? Talk to us like I hear a lot of stories these days, we are in a gold bubble, I hear this all the time. Forty articles a week come out, we are in a gold bubble right, and I do not think that is true. Because I can walk out on the street right now, take the first hundred people that walk by and ask how many of them own gold on an investment basis and I bet the answer is zero to one or two. To me that is a bubble so let us talk about what that bubble was like when we were really hitting that peak in January of 1980 or so. What was it like here?
Robert Mish: Well the phone calls were ringing so much we could not answer them. We had to just put all our lines on hold so we could service the customers, and our own customers we wanted to service first. We world come in to open at nine in the morning and there would already be a line out the door and down the block. Sometimes the line was mostly buyers, sometimes there were sellers. We would run out of metal, we would run out of anything and we would have to divide the line in two lines. We would take the sellers in first, get some product, sort it while the buyers are walking in and people were not very discriminating then, they were panicking. By the time it peaked in January 1980, there were people out there who did not even understand free market economics or precious metal economics, they were just buying because it was fashionable or because it was going up forever. Those are more the makings of a bubble, today most people are coming in to sell.
Chris Martenson: Most individuals are coming in.
Robert Mish: Yeah, the majority of people coming in are coming into sell. Now every equation has a balance, but the reason is because the buyers are either overseas where we export or they are bigger money than the sellers.
Chris Martenson: So describe the typical seller today, is this somebody with the smallish collection, just has some gold, some silver, somehow?
Robert Mish: Well the typical seller today is really the opposite of who they were 30, 40, 50 years ago. People used to save either through a bank account to keeping some coins around, putting away silver dollars when they came back from Reno or Lake Tahoe. They would be buying some interesting furniture or jewelry and then they had income in excess of their expenses. Today so many households are stressed having expenses greater than their income or servicing a lot of debt that they are starting to sell the things, the heirlooms that they so prized before. So we are seeing people sell their Rolex they do not want anymore or cannot afford to keep, their old jewelry, their parent’s jewelry and belongings that they inherited. The coins they collected when they were a kid, it is sad in a way because what we are seeing is the dishoarding of a culture.
Chris Martenson: And so these people are bringing in their heirlooms and they are just looking for cash at this point in time. Who is buying, you mentioned it is going overseas; I would like to find out what you know about that and who the typical buyer is at this point?
Robert Mish: Well in the United States, the typical buyer is perhaps someone who has taken the crash course and has studied what is happening to our nation and understands that they have to protect themselves from the coming inflation and social ramifications of that inflation and the debt burdened economy. Big money is buying but for every one buyer there has got to be five sellers here and I am sure that is similar among my colleagues around the country, maybe even more so. Because over here we are in a wealthier area and I still have more sellers than buyers. A lot of it is going overseas, a lot of the coins that came to America over the decades, over the generations, either through the fact that we had the money to buy them or through immigration or through the spoils of war, it is all going back now to the home countries. Especially if it is a home country, where their economies are rising and the people are saving rather than spending. Just last night we had two visitors from china, colleagues of mine in Shanghai, they flew here just to see me, and they flew back the next morning. They cannot get enough coins in china; they are buying everything back that came here when the people in china could not buy their own coins. Next weekend I have more visitors coming, coin shows, which have been all over America, are now appearing all over the world. There is now major coin shows in gathering marts in Singapore, Tokyo, Beijing, Hong Kong, it used to be once a year, now it is three, four times a year. Big auctions that used to be held in the United States are now organizing in Hong Kong and other countries. So we are seeing again, we are seeing a movement back in the opposite direction and it is sad.
Chris Martenson: So the ebb and flow of gold and silver really can be tracking the rise and fall of fortunes as it were, leaving out the spoils of war so I guess those went the victors. But otherwise, we are saying that once a nation of savers in the United States, now a nation of spenders and in that once we accumulated gold and silver, now we are selling it typically at the smaller retail level. For every small seller there is one big buyer stepping in and a lot of these buyers maybe are from other countries now, particularly savings countries, countries that are on the ascendency. There is a lot of new wealth created in china, they have a saving culture, so we are seeing the ebb and flow, gold and silver are flowing in that direction, is that fair?
Robert Mish: That is true, and I was thinking we still do have small buyers here and by small buyers, I mean people who produce more than they spend and save the difference. So many of those savers who buy one ounce of gold a month, they are people who have settled here from saving cultures. People from India, from China, I am not seeing Americans who have been here for a few generations buying one Krugerrand a month, very unusual.
Chris Martenson: And so in your business now is this mostly bullion at this point that people are interested in or are people interested in numismatics at this stage or is jewelry still coming and going?
Robert Mish: Well most of the new buyers are just buying for bullion and it has actually hurt the coin market. Coins were something again that it is either a hobby or a hobby investment. You save money among other ways through coins, you accumulate them, and you enjoy them. If they never went up in value, you would have gotten the utility of enjoying the hobby and enjoying what you learned. But much of what is coming because back through the door are all those same coins. We are basically recovering everything that Americans accumulated or was sold to them in past generations. Now the typical buyer is conscious of what percent over gold is this product cost and how liquid is it anywhere in the world. We lost a generation or two of coin collectors to video games and computers and other things that do not involve savings but involve consumption.
Chris Martenson: And that consumption sort of extends I guess throughout all levels of society, maybe to government as well and you have been in business a long time. I am wondering if you have any reflections on how the business environment has shifted over time, whether you find it as agreeable a business environment today as it used to be or if things are getting easier or harder in the way that would make you want to continue going on.
Robert Mish: There are fewer in my business today than there were 40 years ago. Forty years ago, there was a coin store in every town, sometimes multiples of them. Today there are fewer real coin dealers, there is a whole new proliferation of gold buyers and scrap buyers, but less coin dealers. So those of us who know and understand coins and recover these coins are few and we are getting busier and busier and we are actually getting overwhelmed. In fact I think as things turn from the public dishoarding, further along the monetary crisis where it becomes like the 1970’s where those who have anything left start to convert back to precious metals, we are going to be overwhelmed even more than we were last time. The refiners, the dealers, there is going to be cash flow problems, turnaround time problems, refining problems, liquidity problems. People who rely on the internet or on the mail system or delivery system to get their product back and forth are going to have difficulties if they do not have good local relationships. Not only for the things, you speak about in neighborly cooperation for food and essentials but also to facilitate a medium of exchange.
Chris Martenson: So you mentioned refinery problems, what is a refinery problem?
Robert Mish: A refinery problem is where dealer buys the scrap gold and the scrap silver and his refiner cannot get a process for several weeks or months and that squeezes his cash flow so he has to pay less and less to the public.
Chris Martenson: So if I walk in with a bag of junk silver, it is 90% silver, it has always been trading well but if we are in a real hay day, your refiner says I am backed up 11 weeks. I can take that in 11 weeks, meanwhile prices are gyrating, you are going to look at me and say what?
Robert Mish: I am going to say Mr. Martenson, I wish you had come in here with pure tradable silver or something that is exchange ready, industrially ready or what it may be but I think it might be something else. The marketplace is choice for medium of exchange, if you have silver in any other form. If it is in odd such as coins, broken spoons and knives, or whatever and I have to have it refined in order to get it, back in a marketable form, it is going to suffer a discount and that discount is going to be greater the longer it takes to turn that around.
Chris Martenson: So anything that has to cycle through a refinery has that refinery risk. What was the discount that got applied say at its most maximum in the 1980’s?
Robert Mish: In the 1980, when we were about eight weeks backlogged and not everyone even had a refiner relationship and had to rely on other dealers who did, it got to about 30% discount for having the wrong form of silver versus the right form.
Chris Martenson: Right, so you could still move it but you would take a hit on it.
Robert Mish: Yes.
Chris Martenson: Relative to spot.
Robert Mish: Well there is always a market, markets incorporates cash flow risk and time.
Chris Martenson: So is somebody was just starting out today, like I walk in and I am one of these rare Americans, I have saved and I say I would like to get started in precious metals, how would you advise me?
Robert Mish: Well we could have a talk about what your temperament is for risk and what viewpoints you already have as to which precious metal you are more biased towards, silver, platinum, palladium, gold. Find out if you are going to be staying here or are you going to be traveling around the world. Find out if your viewpoint is as a protection from, if your reasons are to protect yourself from inflation and to hold some of you assets in reserve. Or if you believe the need of medium of exchange is imminent because of the breakdown and acceptance of government currency units then we would know if you want small coins, large coins, or just big bricks of gold or silver. How much premium is appropriate for you in order to get the right form for the times as they are evolving and whether we are having an inflationary boom or an inflationary depression, which will have an impact on whether you have any industrial metals or only monetary metals.
Chris Martenson: So do you consider gold and silver the same or do you consider silver more of an industrial metal than a monetary metal?
Robert Mish: Well it is both, some of the demand for silver comes from industry, some comes from its perception as a monetary metal. I think the balance of the components of where the demand comes from will be changing and evolving.
Chris Martenson: Which do you like better right now from a potential returns standpoint?
Robert Mish: Well the easy answer is silver.
Chris Martenson: Silver has got more upside.
Robert Mish: It has more upside that is contentioned upon how things play out in the coming monetary crisis. But I think affordability as the general public moves into precious metals, more of it will spill into silver than gold.
Chris Martenson: So again just to be very clear about this, where do you think we are in that story of the public moving into precious metals?
Robert Mish: On a ten point scale, two.
Chris Martenson: We are at a two, and when we get to nine you will let me know, hey my store is jammed.
Robert Mish: I will not be able to because my phones will be all on hold.
Chris Martenson: Oh that is right, you will not be answering your phones.
Robert Mish: There will be crowds outside my door and you will have to fight your way through. We will meet secretly here at four in the morning.
Chris Martenson: Okay good, because I would like to know when we are at that nine state or ten stage because there will be a time to sell again at some point, I just fear we are very far from it.
Robert Mish: Well there also be some dangerous times ahead, I think the desperation sets in that is going to change the way we all do business. Desperation and security are always on my mind, desperation not only of those who have been hurt economically and have been told to blame the evil businessmen or the gold hoarders instead of where the blame rightfully belongs.
Chris Martenson: You know, I was just sort of a tangential anecdote but there was a case of a Dutch man recently, he owns a tobacco shop in Holland somewhere and he was in Germany and bought some Cuban cigars from a German. His money transferred for whatever reason, routed out of his country and came through the US heading towards Germany and it got tracked through the patriot act something and they ceased it and held it and kept it and said we are not giving it back to you. Because you were going to conduct an illegal transaction because we do not condone buying Cuban cigars here in America. He said wait a minute, I am not an American, I was not in America, but they said, but your transaction moved through here and it is just sort of an anecdote of how these laws and reach do not have to make sense. Once they get put in place, how they continue to creep a little bit. Certainly I think that story has resonated a little bit in Europe where they are just quite upset and think that is maybe a bit heavy handed over here, but it is an example perhaps of what happens when somehow common sense goes out the window after a period of time and you end up with stories like that.
Chris Martenson: Do you ever worry about confiscation again, I get this question all the time?
Robert Mish: My old answer was no, confiscation occurred under circumstances when we were all obedient citizens and were not as worldly and did not have the means of communication and information as today. It might be wise to not only consider where gold is going to be tomorrow or where they said it was going to be tomorrow as to when you act and it may also take into account will you be able to act and buy and sell freely down the road.
Chris Martenson: Yep, lot of risks out there, so the story as I have heard it today is we are still very early in public awareness and participation in the United States. Mostly sellers, small sellers, large buyers and a lot of the gold and silver that is being sold is heading off shore and heading out. It helps the exports so, when you see the US export figures, make sure you look at the line for precious metals, it is probably growing nicely, we can be proud of that. So we are still early in this story and you have seen the waves come and go and your sense we are at the beginning of this next wave of interest, participation and price appreciation.
Robert Mish: Yes, I believe so, I do not see any panic on the part of buyers or the public, there is still a lot of unawareness. People who come in who know that some people are buying gold or silver, if they have not done their homework and understand why they are, they do not feel pressed to act. They will walk out and think about it for a month or a year, it is not like it was in the 1979, 1980. It was still a part of our culture, there would be on the tonight show Johnny Carson would tell jokes about Krugerrand. The cartoons would appear in editorials about paying for your groceries with gold, they would not take money. When you see it in our culture enough to where it is part of our humor and it is part of our pop culture, then you know that we are somewhere near that peak, that mania. But more so than ever when you see lines out my door.
Chris Martenson: And for anybody who happens to be in the Menlo Park region, Adam and I have sent many a person to Mish International Monetary right here on University Drive. I would advise anybody who wants good, experienced consult and nice product selection, I love this store. We are surrounded by nice things here and so there is great selection here and I would advise anybody to come and have a chat and talk about how they can protect their wealth. Because we are early in this game and there are lots to go still.
Robert Mish: Thank you, I think what you see here is because I am still a collector, I am still a hoarder. I mean I am in it as a business but I also still have that passion for the hobby. So my colleagues they like to joke about me because I never melt anything. I hang on to everything and now I cannot even walk around here but what is left is a lot of interesting things for people to see and learn from because what we do not melt is something we can learn from. Why it was minted, why it was around, why it is coming back. Who is buying it, who is selling it, if you look at the history of coins of the world, it is interesting as to what different cultures and countries would put on their coins. Whether they put on their coins the politicians at the time being or military or power type motifs or whether they were things of culture or animals, it tells you a lot. A lot of history has been rewritten or gaps filled in through finds of coin hoards from burials or excavations. So that is what I still enjoy, I can sit-down with a box of old coins, even after 50 years and even after co-authoring a lot of books and sharing my experience and research, I learn something new every day. I can get lost with the story of a very inexpensive coin that I had not seen before and this is what is really missing from the youth of today, they are not getting that.
Chris Martenson: Well do not worry…
Robert Mish: They are not getting history in their hands.
Chris Martenson: In 800 years people will be holding onto paper dollars, looking at them.
Robert Mish: No, they will be decaying.
Chris Martenson: Experiencing that same wonder and mystery.
Robert Mish: Dust to dust.
Chris Martenson: Gold and silver, they do not corrode, the do not erode so that the metal and monetary metals all this time.
Robert Mish: Exactly.
Chris Martenson: Well Robert thank you so much for you time.
Robert Mish: Thank you Chris.
Chris Martenson: I really appreciate this and I cannot wait to share this with the rest of the listening public out there.
Robert Mish: I am honored, thank you.