When Is A Silver Dollar Worth $2.3 Million?

Last week, an 1804 Adams-Carter Silver dollar sold at auction for a whopping $2.3 million.  That’s a pretty good amount for  1 ounce of silver worth about $12! There are only 15 such coins known to exist and they’re quite popular.


The buyer was New Jersey dealer John Albanese, who said that the price was “basically a half-million down from last year because of the recession. It was a good opportunity. These don’t come around all the time.” The coin, the finest Class III 1804 dollar outside museums and available to collectors, had been expected to fetch $2 million.

The varieties of 1804 silver dollars are known as Class I, Class II, and Class III. The Class I pieces are sometimes called Originals, although that name is inaccurate, since they were struck in 1834 rather than 1804. The Class II and Class III pieces are sometimes called Restrikes, also an inaccurate name since there were technically no Originals.


A single obverse die and two reverse dies were created for all of the 1804 dollars, and it is virtually certain that the dies were all made at the same time, certainly no later than 1834. The dies were also produced by the same engraver. The two reverse dies have been designated as Reverse X and Reverse Y, following past literature on the subject.

Assuming these were minted in 1834 and are thus 175 years ago, that means the coin appreciated 8.731% a year. Not a bad rate of return!  Hopefully, someday my collection of Morgan Silver Dollars and Peace Silver Dollars will be worth something too.

Peter Schiff: Dollar Is The Next Bubble To Collapse

Here’s an excellent video starring Peter Schiff.  He predicts that the US Dollar will be the next bubble to burst. As a corrollary, I think gold will be the next bubble. The dollar collapse seems unlikely, you say? Well he did predict the collapse of the housing market 4 years ago and was met with wide-spread ridicule.

Like I’ve been saying for ages, make sure you buy some gold coinsSilver coins aren’t bad either.

Long-Short Bond Trade: Now With Reduced Volatility!

In a previous post on Deleveraging, I promised I’d talk about an interesting long-short bond trade that I entered last week.

If you believe that US Treasuries are over-valued, or foreigners will lose their appetite for US debt thus forcing up the interest rates, you’re probably looking to short treasuries.  Ok, maybe you haven’t looked in to shorting anything.  In that case, may be you should read this link on Barrons and then come back. (Barron’s thinks that investors are buying gold as an alternative to near-zero yielding treasuries.)

One of the ways to short the Treasuries is buying the UltraShort Lehman 20+ Treasury ProShares (TBT).  This ETF returns twice the inverse of the daily movement in the 20 year T-bill. However, these things never move in a straight line and can be extremely volatile.

Instead, I decided to do something a little esoteric.

I shorted the iShares Barclays 20+ Year Treasury Bond (TLT) and netted $112.10 per share.  I used that money to buy an equivalent dollar amount  of the Alliance Bernstein Global High Income Fund, Inc. (AWF) at $8.29 (that’s buying about 13.52 shares of AWF for every share shorted of TLT).  Unlike the TBT position however, this position yields a dividend! AWF has a yield of ~13.4% while the short TLT position had a negative yield of 3.5% (since I shorted the ETF I need to pay this dividend), which results in a positive net dividend yield of ~9.9%.

Since TLT and AWF might sometimes move in sync, you’d think this portfolio would have a lower volatility than just TBT. Just to be sure, I also calculated the standard deviation of this portfolio on a bloomberg terminal at school and the resulting standard deviation was about 30% lower than for each individual ETF. (The standard deviation is often used by investors to measure the risk of a stock or a stock portfolio. The basic idea is that the standard deviation is a measure of volatility: the more a stock’s returns vary from the stock’s average return, the more volatile the stock. In short, less volatility is better).

Check out the graphs of TLT, AWF and TBT. Remember, TLT is a short position so you need to multiply the returns by -1 and add it to AWF.

long corporate bonds - short US treasuries

From the chart you can see that yesterday both TLT and AWF trended higher and predictably TBT lost value.  However the combined portfolio was slightly positive.

After last years volatile returns, anything that reduces volatility in your portfolio is a good thing!

Note that AWF is mainly comprised of short-term US corporate debt and some soverign bonds. There is a some foreign currency risk involved but with the US Dollar being a lot higher than it was a year ago, I’m willing to take this risk.

[Disclaimer: In case it wasn’t obvious, I’m long AWF (short-term corporate bonds) and short TLT (long-term government bonds).]

Quick, Hide Your Ron Paul Dollars!

The offices of Liberty Dollar were raided by the FBI yesterday. Apparently they didn’t like the fact that they were selling Silver Ron Paul Dollars! I don’t understand how anyone buying the $20 coin for $25 would mistakenly assume that they were legal tender but I guess someone at the FBI HQ did!Actually, they were also selling Silver certificates, redeemable for actual silver. This can be construed as a currency which is illegal. Only the Federal Reserve has the right to issue pieces of paper (that aren’t backed by anything) to use as barter.
The silver dollars which were available for $25 a few days are currently going on Ebay for $305! Damn, I wish I had bought a few.

How is this different from the local currency of southern Massachusettes, the Berskshire?

“BerkShares are a local currency designed for use in the Southern Berkshire region of Massachusetts with issue by BerkShares, Inc., a non-profit organization working in collaboration with the Southern Berkshire Chamber of Commerce, participating local banks, local businesses, and local non-profit organizations.The purpose of a local currency is to function on a local scale the same way that national currencies have functioned on a national scale—building the local economy by maximizing circulation of trade within a defined region.”