Wednesday, January 6, 2016

A Koalaty Bullion Silver Coin For 2016

It's been awhile since I've strongly recommended a particular bullion silver coin on this site, but the last I recall was the 2014 1oz Bullion Silver Wedge-Tailed Eagle. That coin was available for A$29 per coin on release and now sell for well over $40 ($60'ish on ebay individually or low to mid $40's by the roll elsewhere). That is despite a drop in the spot price of silver over the same period. I have since sold the box of those I bought. So here's my next tip... lame jokes aside I think the 2016 1oz Bullion Silver Koala Coin from Perth Mint is a solid 'buy' (provided you pay a reasonable premium, under A$7 per coin over spot).

Many of the sought after, mintage limited Perth Mint bullion silver coins have held their values (or at least cushioned the blow compared with low premium products) even as the spot price has tanked in recent years. An example being the 2012 1oz Bullion Silver Lunar Dragon Coins I bought in late 2011 for circa $38-42 per coin (pre-ordered from various dealers before release), despite spot price falling some 40% lower since then I recently sold some rolls of these for around what I paid. Not a great return admittedly (break even over 4 years held), but still a far better return than on low premium silver bars. I like many of Perth Mint's silver bullion coins as a hedge against spot price downside as premiums increase with demand for the specific coin. Of course like any investment, there are no guarantees that premium holds and you do need to pick carefully.

I have not been that impressed with the koala coin designs from Perth Mint for some time. In many instances the illustration is fine, it just hasn't translated that well into coin from (the below is from 2012):

However, in my view the 2016 design is a cut above any others since 2010:

Furthermore Perth Mint is now limiting the mintage of the 1oz coin to 300,000, this is far lower than the declared mintage of some other recent years:

20071oz Bullion Silver Koala Coin 2007137,768
20081oz Bullion Silver Koala Coin 200884,057
20091oz Bullion Silver Koala Coin 2009336,757
20101oz Bullion Silver Koala Coin 2010233,531
20111oz Bullion Silver Koala Coin 2011910,480
20121oz Bullion Silver Koala Coin 2012388,046
20131oz Bullion Silver Koala Coin 2013477,209
20141oz Bullion Silver Koala Coin 2014334,884

The 2015 coin has sales recorded to the end of 2014 of 96,297, obviously that will see a substantial jump once updated with more recent numbers. I would be very surprised if the declared mintage is lower than 300,000, my guess would be somewhere between 350,000 and 450,000.

These coins:

- Have a low mintage
- Sport an aesthetically pleasing design
- Are housed in individual capsules
- Have a quality finish
- Are produced by world renowned Perth Mint
- Come with legal tender status And are priced as bullion coins on release.

With the recent upgrade in facilities at Perth Mint to pump out their new low premium bullion kangaroo coin, this has resulted in higher coin sales (chart via Smaulgld) and ultimately wider distribution which I expect will bring more eyes and investor/collector interest to other bullion coin series they have, such as the aforementioned koala.

I have not purchased any myself as I'm lacking room in my safe deposit box/es, but it's likely to be the only silver bullion I buy in bulk quantities this year if I do so.


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Monday, January 4, 2016

Don't Live And Die Waiting For The Big Crash

I saw The Big Short recently and this quote flashed up on the screen:
“Everyone, deep in their hearts, is waiting for the end of the world to come.” ― Haruki Murakami, 1Q84
But my advice would be not to live your whole life waiting for, planning for, or even hoping for, the next "big crash" (either of the financial system or housing market, arguably the two are joined at the hip in many modern economies).

That might sound odd coming from someone who's analysis, speculation and investments led them to buy a lot of precious metals and write under a handle like 'Bullion Baron'. Some readers may picture me as a nutter with a bunker full of long life food, guns and Gold, just waiting to live out the financial apocalypse 'doomsday prepper' style, but the reality is far less intense.

I'm not saying you shouldn't be prepared for and insure yourself against financial catastrophe, but once you have done so, go out and live a little. The last significant purchase of Gold I made was in late 2014 (after accumulating in the dips periodically in the 6 years prior). I have recently felt comfortable buying a home again in my local property market, Adelaide. I have also been spending a fair amount of time and capital over the last several months working on a new business venture (one reason my posts here have been less frequent) and with the recent news that the Australian government will be incentivising investment in startups I may continue to put money in this space.

In a comparison of renting vs buying (Rent vs Buy: An Adelaide "Cost Comparison" Revisted), the financial burden of buying has fallen substantially over the last half a decade as rents have increased (moderately), prices stagnated and interest rates fell. I still think Adelaide property prices have some tough headwinds ahead, the state economy is still struggling (highest unemployment rate in the country) and prices may yet fall again, but I expect them to outperform the likes of Sydney or Melbourne over the next 5 years (even if that means prices fall less in Adelaide).

Sydney house prices grew far more than in Adelaide over the last 7 years
While I'd agree with many housing permabears, that house prices are high in Australia (it is an expensive market, perhaps even a bubble in some cities/regions), they have also remained at elevated levels (relative to incomes) for well over a decade. Whether they correct back to past levels or not should be of no concern if you are treating housing as a consumption good.
I would never discourage others who want the stability of ownership and are prepared to treat housing as a consumable (rather than an investment) from buying. If you have a healthy deposit (preferably one that will help you avoid LMI), fixed interest rate (or able to service higher interest rates), protect yourself (income protection, cash buffer, etc) and expect to stay in the property you purchase for the long term (until mortgage paid off), then it shouldn't matter what prices do (rise, fall or stagnate). - Bullion Baron
Despite buying a home and investing in a new business, I still think the risks to the financial system are immense and I'm in no hurry to reduce my exposure to one of the assets that I still expect to flourish as financial instability returns.

By the way, I looked up the quote from The Big Short when the movie finished as I was interested to see where it came from and it's context. The book it came from, 1Q84, is a novel originating in Japan. The paragraph reads:
Sometime after that, Aomame happened to see the movie On the Beach on late-night television. It was an American movie made around 1960. Total war broke out between the U.S. and the USSR and a huge number of missiles were launched between the continents like schools of flying fish. The earth was annihilated, and humanity was wiped out in almost every part of the world. Thanks to the prevailing winds or something, however, the ashes of death still hadn’t reached Australia in the Southern Hemisphere, though it was just a matter of time. The extinction of the human race was simply unavoidable. The surviving human beings there could do nothing but wait for the end to come. They chose different ways to live out their final days. That was the plot. It was a dark movie offering no hope of salvation. (Though, watching it, Aomame reconfirmed her belief that everyone, deep in their hearts, is waiting for the end of the world to come.)
Wikipedia describes Aomame (and another character in the story) as 'long-lost lovers who are drawn into a distorted version of reality'. I don't think it would be wise to live by the beliefs of this fictional character, rather you should ensure you are prepared for the worst case scenario, but once you have done so live life to the fullest.

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