1970s Pilot Custom Kaede Maple Fountain Pen

1970s Pilot Custom Kaede Maple Fountain Pen
Photo Credit: kensindo

1970s Pilot Custom Kaede Maple Fountain Pen

Buy It Now Price: $145.82 (price as of 2018; item no longer available)

Pros:

-This Japanese Pilot Custom maple fountain pen from the 1970s sports a solid 18 karat gold medium nib and a hand-finished, solid Kaede wood body.

-Pilot is one of Japan’s premiere pen companies.  The origins of the firm can be traced back to 1918, when it was founded as the Namiki Manufacturing Company.  It later changed its name to the Pilot Pen Company in 1938.

-The wood used in this pen is from the Painted Maple tree (scientific name: Acer Pictum, sub-species Acer Mono), which is known as the Itaya Kaede in Japan.  This particular variety of maple tree is native to the temperate climates of East Asia and grows in Japan, Korea and China.  Kaede maple wood is renowned for its hardness and toughness, which makes it perfect for high-end fountain pens.

-The medium-sized nib on this Pilot Custom maple fountain pen is made from solid 18 karat (.750 fine) gold.  High-purity gold nibs, like this 18 karat Pilot nib, are considered an important mark of quality for vintage fountain pens.

-With its original Japanese ¥7,000 price tag still attached, this Pilot maple fountain pen is undoubtedly new-old-stock.  That is great news for pen enthusiasts because it means that the pen is more or less pristine.  In fact, it may not have even been inked, leaving the decision of whether to do so up to its new owner.

-Although it is difficult to tell from the photos, I believe the serial number on the pen’s nib indicates that it was manufactured in Pilot’s Hiratsuka factory in Kanagawa prefecture, just southwest of Tokyo.

-At mid 1970s yen-dollar exchange rates, the ¥7,000 original retail price for this pen was equivalent to a U.S. dollar price tag of around $25.  This was a not insubstantial amount for the time.  For example, $25 would have been enough to buy either a good pair of binoculars or a beginner’s acoustic guitar from the 1975 Sears Wishbook.

-As an added bonus, this vintage Pilot pen comes with its original leather-lined carrying case!

-Vintage Japanese pens from Pilot, Sailor and Platinum are substantially undervalued in today’s antique market.  For those who are interested, I recently featured a stunning Platinum Amazonas PAM-8000 from 1973 in another spotlight post.

-Like most high-end Japanese pens, the fit and finish of this Pilot maple fountain pen is absolutely outstanding.  No wonder pen lovers adore their Pilot pens.

-This fabulous 1970s masterpiece of the Japanese pen-maker’s art would make a great investment at a buy-it-now price of only $146.

 

Cons:

-Unfortunately, the seller does not include a photo that clearly shows the complete serial number on the pen’s nib.  This serial number is an invaluable tool for the Pilot pen collector because it discloses the location, month and year of the nib’s manufacture.  Despite this minor drawback, I feel quite certain that we are dealing with a genuine 1970s era Pilot Custom maple fountain pen.

 

Read more fascinating Antique Sage vintage pen spotlight posts here.

-or-

Read in-depth Antique Sage investment guides here.

Gold Versus Bitcoin as a Store of Energy

Gold Versus Bitcoin as a Store of Energy

Gold mining consumes a massive amount of energy.  So does Bitcoin mining, for that matter.  But rather than being a drawback, I see the high energy consumption of these alternative currencies as an overlooked benefit.

After all, a currency that can’t be arbitrarily created at the whim of 12 corrupt central bankers sitting in an oak-paneled conference room somewhere in the bowels of Washington D.C. is a bonus in my book.  If we had been using either a gold-backed currency or Bitcoin when the 2008 financial crisis struck, it would have been impossible for the Federal Reserve to unilaterally bail out Goldman Sachs, Citigroup and all the other too big to fail banks against the will of the American people.

The fact that real energy and resources have to be expended to acquire new supplies of either gold or Bitcoin is one of the very compelling features that both of these currencies share in common.  In fact, I would argue that is a vital attribute for any successful currency – it must represent a store of energy.

If we compare gold versus Bitcoin from a store of energy perspective, does one have a higher energy density than the other?  And if so, by how much?

Let’s examine the energy density of gold first.

Because it is impossible to get good information on aggregate energy usage in the gold mining industry, I’m going to use a single major gold producer, Goldcorp, as a proxy for industry-wide energy consumption.  Goldcorp, a Canadian-based miner, is one of the world’s largest gold producers, with a 2017 production total of 2.57 million troy ounces.

According to its February 2018 corporate presentation, Goldcorp attributes 14% of its production costs to either fuel (generally diesel or fuel oil) or power (mostly electricity).  But Goldcorp also has other energy intensive costs that fall outside of this narrow definition of energy.

For example, tires (2%), explosives (3%), site costs (5%), maintenance parts (9%) and consumables (15%) are all energy sinks.

The massive tires used on mining vehicles are composed almost entirely of oil derivatives.  A tire for the massive Caterpillar 797B dump truck weighs 11,860 pounds (5,380 kilos) and contains almost 2,000 pounds (907 kilos) of steel, which is itself a very energy intensive metal to mine and refine.  It is estimated that each one of these mammoth tires consumes 100 barrels of oil to fabricate.

Explosives are another energy cost in disguise.  Although it is generally accounted for as a material on a mining company’s ledger, explosives are actually highly concentrated chemical energy.

Two of the most commonly used explosives in mining today are ANFO and TNT.  ANFO is composed of 94% ammonium nitrate and 6% fuel oil (another hidden energy expenditure).  Ammonium nitrate, in turn, is created by reacting gaseous ammonia with nitric acid.  However, ammonia is not found free in nature and must instead be synthesized via the Haber process.

The Haber process is extremely energy intensive because it requires high pressures (between 150 and 250 atmospheres) and temperatures (750 to 930 °F or 400 to 500 °C) in order to work.  In fact, it is estimated that ammonia synthesis via the Haber process devours more than 1% of total global energy output.

TNT, or trinitrotoluene, is hardly less energy intensive.  The base chemical used to create TNT is toluene, a light hydrocarbon fractionate.  Although it occurs naturally in crude oil in limited quantities, most toluene is a byproduct of gasoline production via either hydrocarbon cracking or catalytic reforming.

Gold mining site costs are another secret energy cost center.  While these can vary widely from mine to mine, they include exploration drilling, mine ventilation, waste water disposal, waste rock removal and site reclamation.   These activities consume large quantities of energy, only a portion of which are accounted for in raw electricity and fuel costs.

All of the equipment and replacement parts used to keep a gold mine running smoothly also cost a great deal in energy terms.  Parts and machinery must be fabricated in a factory and then transported to the mine site, which is often geographically remote.  Even common raw materials used in gold mining, like lime and sodium-cyanide, require tremendous amounts of energy to synthesize or extract.

And, of course, we can’t ignore the fuel costs attributable to commuting mine workers and contractors, which only show up as an indirect, payroll cost.

Overall, it wouldn’t be an exaggeration to guess that anywhere from 1/4 to 1/3 of the cost of gold extraction is directly attributable to energy, either in the form of electricity or fossil fuels.

According to an estimate by industry consultant CPM Group in its 2018 Gold Yearbook, the All-In-Sustaining-Cost (AISC) to mine an ounce of gold averaged $949 across the entire gold mining industry in Q3 of 2017.

This means that there is between $237 and $316 worth of energy embedded in every ounce of gold pulled from the ground.  With WTI crude currently trading at $51 a barrel and using the midpoint of the above energy consumption estimate, there is the equivalent of just over 5.4 barrels of oil used in the extraction of each ounce of gold.  That is equivalent to 31.6 gigajoules (GJs) of energy per ounce!

We can calculate gold’s electrical energy equivalence at around 8,800 KHW per troy ounce.  This represents about 10 months’ worth of electrical usage for the average American household.

So gold represents an excellent store of energy, being incredibly energy dense.  But how does the energy consumption of crypto-currencies compare?  Is Bitcoin far behind?

For Bitcoin’s energy usage estimates, I’m going to rely heavily on the work of Alex de Vries, who is widely regarded as the world’s leading authority on Bitcoin energy consumption, as well as being a prominent blockchain expert.

According to Mr. Vries latest estimates, Bitcoin’s blockchain calculations consume about 67 terawatt-hours (TWH) annually, which is about the same amount of electricity that the South American country of Chile uses in a year.  As of 2018, the average time between each successfully mined Bitcoin block is about 9 and 1/3 minutes.  And each of these new blocks rewards miners with 12.5 new Bitcoins.

So we can extrapolate that somewhere around 704,000 new Bitcoins are created every year via mining.

This means that each freshly mined Bitcoin represents just over 95,000 KWH of electrical energy.  This is equivalent to about 110 months of electrical usage for the average American household.

Although not directly comparable because Bitcoin is mined using electricity and not oil, each unit of the premier crypto-currency is equivalent to over 58 barrels of oil.  This represents 342 GJ of energy per Bitcoin.

But what about the energy density of gold versus Bitcoin on a dollar for dollar basis?

With Bitcoin currently trading at $3,500, each dollar’s worth of Bitcoin stores about 27.1 KWH of energy.  With gold going for around $1,240 a troy ounce, every dollar of the precious metal symbolizes around 7.1 KWH.

An energy assessment of gold versus Bitcoin from an oil perspective gives us similar values.  Each dollar of Bitcoin equals 0.0167 barrels of oil, while every dollar of gold is 0.0033 barrels of oil.

So Bitcoin has a clear advantage in energy density versus gold, with a ratio of 3.8 to 1 in Bitcoin’s favor.

Of course, it is wise to keep in mind that this energy density ratio is somewhat arbitrary.  It will fluctuate markedly with changes in the relative market value of gold versus Bitcoin.  In fact, as the price of Bitcoin has dropped over the past several months, the preeminent crypto-currency has become more “energy rich” on a per dollar basis relative to gold.

Another factor to keep in mind is that both Bitcoin and gold are only energy storage vehicles in a very abstract way.  It is not possible to pull electricity or oil back out of either of these alternative currencies once it has been consumed in their production.

Instead, both gold and Bitcoin provide their users with very different sets of energy-derived benefits.  Gold is a physical commodity that possesses excellent corrosion resistance, malleability and ductility, as well as superb electrical and thermal conductivity.  Some people bizarrely conclude that this means the yellow metal has no intrinsic value.  I strongly disagree, as I argued in a recent article I wrote on the intrinsic value of gold and gemstones.

On the other hand, Bitcoin provides its users with a fully digital currency secured by an incorruptible, publicly-verifiable blockchain.

Personally, I feel that gold has the edge here, although you might reasonably reach a different conclusion.  Bitcoin’s blockchain technology is certainly innovative and definitely has value, but this value is completely self-referential.

For example, do we really need to know how much someone’s Starbucks latte cost 5 years ago?  As it is currently structured, Bitcoin will retain this (and other equally superfluous) transactional data in perpetuity.

I believe that earth’s scarce energy resources could be better utilized.  For instance, the electrical energy consumed in crypto-currency calculations could instead be used to tackle computationally-intensive math problems that would broadly benefit humanity.  For those who are interested, this is a topic I addressed in greater detail in an article titled “Blockchain 3.0 and the Problem with Bitcoin“.

 

Read more thought-provoking Antique Sage crypto-currency articles here.

-or-

Read in-depth Antique Sage investment guides here.

17th Century Silver Gilt Snuff Box

17th Century Silver Gilt Snuff Box
Photo Credit: CJ Antiques Ltd

17th Century Silver Gilt Snuff Box

Buy It Now Price: $865 (price as of 2018; item no longer available)

Pros:

-This 17th century silver gilt snuff box has been made from two large silver coins: an Austrian Taler of Ferdinand II and an English Crown of James I.

-This unusual round antique box measures 45 mm (1.77 inches) wide by 17 mm (0.67 inches) deep and contains 85.3 grams (2.74 troy ounces) of solid silver alloy.

-Inhaling very fine tobacco dust was popular among European nobility from the early 17th century to the mid 19th century.  As a result, lavish snuff boxes were the iPhones of their day – a must for any well-to-do gentleman or lady of high class.  These small silver boxes were typically gold-gilt in order to resist the corrosive effects of tobacco.  Antique snuff boxes are often similar in construction to vinaigrettes, which were intended to carry perfume soaked sponges instead of tobacco.

-A modern buyer could use this extravagant antique snuff box to as a pill box, jewelry box or trinket box today.

-The top of this silver gilt snuff box features a silver Taler coin of Ferdinand II, Archduke of Further Austria and the Tyrol.  Ferdinand II, a scion of the Hapsburgs, ruled from 1564 to 1595.  He was also the younger brother of the sitting Holy Roman Emperor, Maximilian II.

-The bottom of this 17th century silver box is made from a silver Crown of James I, the King of England from 1603 to 1625.  James was originally the king of Scotland and it was during his reign that the monarchies of England and Scotland were first combined in what would later become the United Kingdom.

-Crowns and Talers were massive silver coins that weighed in at a hefty 30 grams (0.96 troy ounces) each.  These large silver coins had considerable buying power during the 16th and 17th centuries.

-This snuff box would have contained about 14 shillings worth of silver when measured in 17th century English currency.  To put this substantial sum of money in context, it would have been enough to buy 175 stout oak boards or 168 pounds (76 kilos) of prime grade beef, or rent a room at an inn for 42 days straight.

-17th century antique silver is very rare today.  There were never very large amounts of it made and nearly all of that has been melted down over the intervening centuries.  The buyer of this fine silver gilt snuff box will be in very exclusive company.

-This beautiful old silver box was fire gilt both inside and out.  Fire gilding, also known as mercury gilding, was the original and best way to gold-plate metal.  Unfortunately, fire gilding died out in the mid 19th century with the rise of cheaper, but inferior electroplating methods.

-At only $865, this 17th century silver gilt snuff box is an investment-grade piece of early antique silver available to the connoisseur at a modest price.

 

Cons:

-While this antique silver box is in exceptional condition for being over 300 years old, there is one old, inconspicuous file mark on the side.  This was undoubtedly done centuries ago by someone who wanted to test whether the box was solid silver (which it is).

-Although the form is unmistakably old, I am unable to determine where this interesting silver gilt snuff box was made.  Because it has a coin from both England and Austria, it is natural to conclude that it was made in one of those two locations (although Southern Germany, which was also part of the Hapsburg domain, is another logical choice).  In any case, I feel confident that it was fabricated in Europe sometime between about 1660 and 1720.

-This 17th century silver gilt snuff box is not hallmarked.  It wasn’t unusual for small, personal items made from precious metals to lack hallmarks during this period.  However, hallmarks would have helped us determine its country of origin and age more precisely.

 

Read more fascinating Antique Sage spotlight posts here.

-or-

Read in-depth Antique Sage investment guides here.

Profiting from the Global Dollar Shortage of 2019

Profiting from the Global Dollar Shortage of 2019

We are on the verge of a dollar shortage – a monstrous, massive global dollar shortage.  The kind of dollar shortage that goes down in history as a singular, unprecedented event.  And it represents a great opportunity to make money in the tangible asset space.

It has been apparent for some time now that financial conditions are tightening.  The Federal Reserve has been raising short term interest rates relentlessly since December 2016.  They have also been engaging in quantitative tightening – the slow, but persistent shrinking of the Fed balance sheet – since November 2017.

These developments are beginning to have an impact on global liquidity, especially against a backdrop of inflated bubble financial markets.  This means that the dollar is getting stronger versus just about every other currency out there:

The Brazilian Real declined from 3.3 to the dollar a year ago to 3.85 today, a -14% loss.

The Turkish Lira had a rough time, moving from 3.84 to the dollar to 5.38 at the end of 2018, a -29% drop.

The Iranian Rial’s black market rate plummeted from 41,000 in November 2017 to 117,000 in November 2018, a stomach churning -65% fall.

The Argentinean Peso hardly did any better, experiencing a -54% depreciation from 17 to the dollar at the beginning of the year to 37 at the end.

However, the worst of the lot was the Zimbabwean Zollar, a debt instrument issued by the African country’s central government that circulates like currency.  Each Zollar is supposed to be worth 1 US dollar.  But that didn’t stop the Zollar from collapsing from 1.4 to the dollar during the summer of 2018 to 10 to the dollar a mere six months later, an astounding -86% decline in purchasing power.

I won’t even bother mentioning Venezuela, which is currently experiencing a crippling hyperinflation.  Its currency is quite literally not worth the paper it is printed on.

The global dollar shortage isn’t just limited to basket case emerging market currencies though. Other financial markets are also starting to break down due to a lack of dollars.

The crypto-currency complex is a prime illustration.  The much hyped Bitcoin is down a breathtaking 72% for 2018, from $14,100 at the beginning of the year to less than $4,000 right now.

Lower-rated corporate debt is also feeling the heat of the dollar shortage.  Yield spreads on junk bonds are up over 100 basis points in just the last 2 to 3 months.

Even the poster children of our current Everything Bubble – the FANG stocks – have lost their sizzle due to the sudden dollar shortage.  The FANG stocks, consisting of Facebook, Amazon, Netflix and Google (now Alphabet), have dropped by a shocking -20% over the past 4 months.

As harrowing as this flood of bad news might seem, we are at the very beginning of the global dollar shortage.  It will get much, much worse before it gets better.

All of this means that you’d better have some safe, liquid assets in your portfolio – things like U.S. Savings Bonds, U.S. Treasury securities, or an FDIC insured bank account/money market account.

Of course, the Fed won’t stand idly by while the financial world burns down around them.  They will leap into action, pumping unbelievably large amounts of dollars into the world’s financial system in an attempt to stem the global dollar shortage.

Unfortunately, the Fed is almost guaranteed to overreact to the financial panic by printing far more dollars than it should.  In the last financial crisis, the Fed increased the size of its balance sheet from about $900 billion to $4.5 trillion.  And honestly, that barely got the job done, spawning the most tepid recovery in U.S. post-war history.

This time around I expect the Fed to balloon its balance sheet to nothing less than an astounding $20 trillion dollars.  The sums involved are so large as to almost be beyond comprehension.

But suffice it to say that all this money printing is ultimately bad for the value of the dollar.  Every new dollar that gets created dilutes the existing supply of dollars.

This is why I recommend that everybody store a portion of their wealth in portable tangible assets – things like precious metals, fine art, antiques and gemstones.

Now here is the tricky part.

In the midst of this unprecedented dollar shortage, the Fed will be rapidly debasing the dollar by handing out fistfuls of them to foreign central banks and too-big-to-fail financial institutions.  But in spite of this massive debasement, the dollar will still temporarily strengthen for a period of time.  This is precisely the moment when you must be trading your dollars for tangible assets.

This is actually a lot harder to do in reality than it sounds.  You will need to be selling your dollars when everyone else is desperate to hoard them.  People have an inherent herding instinct, especially in financial markets.  From an emotional perspective, a contrarian stance will be incredibly difficult during this time.

But if you can pull it off, some of history’s greatest tangible assets bargains will be yours for the taking.  Precious metals, investment grade antiques and gemstones are all screaming bargains right now.  And I suspect they may get a little bit cheaper yet during the depths of the crisis.

But Rome wasn’t built in a day and neither is a solid tangible asset portfolio.  Slabbed coins, antique silver and vintage watches all take time to properly evaluate and acquire.  Even commodity physical assets like gold and silver might be difficult to acquire at reasonable prices on short notice during an intense financial crisis.

So the smart investor will leg into a tangible asset position.  The few dollars you might save trying to time the exact bottom of the market are likely to cost you a lot of lost profits.

I already suspect that we are seeing the lowest prices (on a valuation basis) in recorded human history for some segments of the antique market.

How cheap are antiques right now?

Profiting from the Global Dollar Shortage of 2019 - Coin

Right now (December 2018) you can buy a random date, PCGS certified MS-63 U.S. Liberty Head gold eagle ($10 coin) for $700 on eBay.  The bullion value of this piece (with spot at $1,234) is $597.  You are only paying $103, or 17.3%, in premium over the coin’s melt value.

Not only that, but these desirable pre-1933 gold coins are eBay Bucks eligible.  During one of eBay’s frequent promotional periods, it would be possible to get 8% to 10% of the gross purchase price back as an eBay Bucks voucher.  This would bring the effective premium over melt down to just $33, or 5.5%.

Think about it for a moment.  You can buy a beautiful and historic 100 year old U.S. gold coin in Mint-State for only $33 more than its scrap value.  That is simply mind-blowing to me.  It is undoubtedly the lowest percentage premium these coins have carried since the late 1930s/early 1940s.

That isn’t the only tangible asset deal out there either.

Profiting from the Global Dollar Shortage of 2019 - Diamond

I recently stumbled upon a luscious 0.34 carat old mine cut diamond on Etsy for $375.  The old mine cut was used in the diamond trade from the 18th century until the end of the 19th century.  These vintage gems are a favorite of sophisticated gem connoisseurs because of their tremendous presence and charm.

As an added bonus, the seller recently marked the stone down by 10% to $337.50.  This comes out to only $10 a point, which is ridiculously cheap for a lightly-included, 19th century diamond of excellent color.  I remember seeing similar prices for antique cut diamonds back in the 2002/2003 recession, except that those stones weren’t as high quality.   $10 a point is less than 60% of the cost of a similar modern-cut stone, which is shocking when you consider that the old mine diamond is hand-cut and has 150 years of history behind it.

But the thing I love most about tangible investments is that they all possess optionality.  Optionality is any element of a financial instrument that you don’t pay much for right now, but might be worth a lot in the future.

Think of it as a lotto ticket.

The only difference is that when the drawing happens on Friday night and you don’t have the winning numbers, the average lotto ticket becomes instantly worthless.  But optionality on a tangible asset is like a perpetual lotto ticket.  There is a drawing every Friday night, and if you don’t win this Friday night, you can just hold onto the asset and wait for your winning number to come up on a future Friday night.

Right now tangible assets have substantial optionality.  And the looming global dollar shortage of 2019-2020 will be one of history’s best opportunities to accumulate these overlooked assets at deep discounts.  Don’t blow it.

 

Read more thought-provoking Antique Sage investing articles here.

-or-

Read in-depth Antique Sage investment guides here.