China, India, Russia Are Buying Silver… Here's Why It Matters - Andy Schectman

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0:39Print postage for certified mail, registered mail, and packages in seconds. Then schedule a pickup right from your home or office. For a limited time, go to Stamps.com and use code PODCAST for a free welcome gift. Taxes and fees apply. This is the Rich Dad Radio Show. The good news and bad news about money. Here's Robert Kiyosaki. Hello, Robert Kiyosaki, Rich Dad Radio Show. We're broadcasting from Phoenix, Arizona, where it's either heaven or hell. And right now, it's close to hell. It's hot as hell. But I love living here. Today's show is with a very dear friend. And one of the best things about my job, per se, is I get to hang out with people who are authorities in their field.

1:23And as some of you know, I've been a hard money asset, a hard money guy for years and years and years. I mean, this here is a 1964 was when they took these little quarters and they turned into copper. And it was called Gresham's Law. and Gresham's Law says that when fake money or bad money enters the system, good money goes into hiding. And there's something intuitive. I don't know what else to say about it, but as soon as I saw that copper, the 1965 or 64, immediately I started saving the real silver, getting rid of the fake silver. That's Gresham's Law. But today, as some of you know, Silver is about to take off again.

2:11I remember it took off during the Hunt Brothers when the Hunt Brothers tried to corner the silver market, and there was a frenzy going on there. But silver right now, in my opinion, is the number one investment you can make today, at least for the bonnet gains. And like I said, one of the best things about my business is I get to hang out with smart guys like Andy Sheckman here. So we're going to be talking to Andy about the business of precious metals. The reason I say that is when I buy precious metals, let's say it's$10, then they add a commission, what you want to call it, onto it. But what happens when you try and sell it?

2:56And lately, U2 has been filled with people trying to sell their gold or silver, and they're getting run around. And so just about four or five years ago, I had a friend I'd been buying. I bought several hundred thousand dollars of gold and silver from him. And when I tried to sell it to him, he gave me one of the worst prices I've ever seen. And I stopped doing business with him. And he's a local guy here, but I just didn't understand the business. And I wrote it off to that. So I usually don't sell. I buy forever and hold. So Andy is in the business of precious metals, coins, and things like this.

3:36Andy, welcome to the Rich Dad Radio Show, and I trust you can shed some light upon your business about when you sell and when you buy back. Absolutely. It's good to be back, Robert. Nice to see you. I'd be happy to be as transparent as I can. Good, good, good. so yes if i buy a pair of shoes for 100 bucks and i wear it for a year i can't expect to get 100 back but if i buy 100 worth of silver and the price of silver goes up i expect to get more money back you know that's that's the nature of this business so how does it work from your end i mean you obviously like it when people buy from you but what happens when somebody comes in to sell their silver or gold to you so most of my career which is 35 years now almost 36 years robert whatever product you would be selling you would receive a premium a excess premium above the spot price above the melt value whatever the product was some products would have a higher premium than others, but there was always a premium.

4:47We can use Silver Eagles as an example, and I can show you what you're really getting at here using Silver Eagles. So let's just pretend that you called me November 2019 and said, I'd like to buy a mint box of Silver Eagles, 500, one ounce, brand new United States Silver Eagles. Sure. You say, Andy, what will you sell it to me for? And if I should need to sell it back, what will you buy it for? I would have said to you something like this. Now, this would have been the same answer I would have given you for pretty darn well near 30 plus years. And I would have said, sure, Robert, I will sell it to you for $3.29 over the price of silver.

5:30I'll buy it back from you for$2.79 over the price of silver. That spread$279 to$329, 60 cents or so, would have been our commission per coin. So$300 on a mint box. That would have been for almost my entire career. That would have been standard. Now you say, okay, I'll do that. In fact, I want to get$100 ,000 worth. Sure. This is November 2019. You call me back six months later, March, April, May, 2020, the pandemic hit. Andy, The pandemic really affected my business. I need to sell those mint boxes. You told me that you would pay me$2.79 over. Is that still good? I'd say, no, it's not. But how about$11 over?

6:19Because the demand was so high for the price of silver, and excuse me, for Silver American Eagles, that in six months, the premium went from$2.79 over bid price to over$11 over the price of silver bid price, where it stood for most of the last, or 2020, 2021, 2022, 2023. And then things changed. They changed in a very substantive way. And that's going to get us to where we are now. So at least in terms of looking at where we were and where we were before that, you always would receive a premium above spot, but a small one. Then came the pandemic, The premiums went much higher. But let's discuss, before I get to where we are today, how those premiums are derived.

7:11Now, there's about five or six massive primary distributors. These are the distributors that work directly with the mints and the refineries globally. These are the companies that some of them are publicly traded. They spend billions with a B of dollars buying and selling precious metals every year from the global mints, South Africa, United Kingdom, Australia, Canada, the United States, and Austria, the six primary mints. and their job is to provide liquidity to the market, to be a market maker. So let's go back to the pandemic. These primary distributors who have agreements with, let's say, the United States Mint, they take everything the Mint will give them because there's so much demand.

8:05The Mint says we're out of product. That's it. No more product. These primary distributors then become the market makers moving forward. They are the ones that set the premiums either to the upside or to the downside. There's so much demand in 2020 and 2021 that they say, we'll pay anyone that wants to send us their Silver Eagles$11 over the price of silver. But we're selling them at$12 or$13 or$14 over. Now, that spread, which was much bigger than normal, was big because you can't hedge the spread or the premium. You can only hedge the metal content. So anyways, first and foremost, your guy in Arizona really is not the one who sets the premium.

8:48It's whoever he's going to sell it to, the big primary distributors. They're the ones who set the premium. What's interesting about right now, maybe the most interesting thing about the environment we find ourselves in right now and why the premiums are so low, is that really starting in 2024, we had the rise of NVIDIA, the accentuation of the Mag7, the huge demand for cryptocurrencies, Bitcoin, you've talked about that for a long time. And so the American public did this 180 during the pandemic and the banking crisis from risk off to risk on. And we saw a lot of selling and non-participation in the metals market.

9:35So the premiums went down. But here's where it gets really interesting. Where we are right now is a very unique situation because you still have the American public who has yet to really take your advice, Robert. They're beginning to. They're waking up. But this is simultaneously happening when the COMEX market is experiencing the largest deliveries that they've ever had in the history of the market. In fact, the May delivery contract for COMEX, where the prices are set globally, delivered the largest amount of gold and silver in the history of the COMEX ever, ever. The biggest money up here, they're standing for delivery.

10:16They're the ones pushing the price higher. The public hasn't. The public has a very tiny, tiny, tiny, if any, allocation to precious metals. In fact, Rick Rule says one half of 1 % across the entire United States from Joe and Jane Six Pack to the Harvard Endowment Fund in terms of allocation to metals. So what that means is there is more physical metal available on the street than the dealers have the ability to sell. And so as more people come in, the bid prices are getting lower and lower and lower. At the same time, the people at the top are draining the world's exchanges. It's just a matter of time.

11:01So anyways, all I'm trying to simply say is this. Until 2020, premiums were almost consistent forever. You pay a few percent over spot. When you buy, you get a couple percent less, but still over the price of spot when you sell. since 2020, everything's gone crazy. Whether it be premiums that are higher than anything I've ever seen in my career to where we are right now. And in defense of this gentleman, I will say industry-wide, the premiums are lower than I've ever seen ever in my career. And it's not us, it's the people one step above us, the primary distributors that are the market makers.

11:44That's really as honest of an answer as I can give you is that when I take in a million dollars worth of gold and silver, if I can sell it to my clients, great. But if I'm a coin shop in Arizona, I may not have that ability and I may not have that liquidity. So I have to turn around and sell it to a company like me or a company above me, the primary distributor and the bid prices are going to be lower because there's so much excess supply built up because the public has been chasing profit instead of realizing what the biggest money in the world is doing, standing for physical delivery. And it's a cycle.

12:22And we're at the bottom end of the cycle now. I would expect to see premiums move much higher industry-wide as there's more awakening in the American public who finally start to say, you know, Robert Kiyosaki was right a long time ago. I should have been buying silver and gold. And when that happens, just like that, the premiums will flip. So in his defense, it's probably not him as much as it is, is the players above him who are bidding for the product he will turn return because he can't hold all that product, whether it be because he can't hedge it or because he doesn't have the checkbook to pay it and leave it sitting on his shelf.

12:57That's the answer. So this is my question. How much power or price setting power does a average little coin dealer have? because what happened was when I sold this stuff, it was my wife who caught it. And she called another friend out of Austin, Texas. And he says, no, you got screwed. So that's what fired us off. And I stopped doing business with him. But that's what I was asking you. How much does that independent dealer have? When they see you walk in the door and you got green boxes of silver or yellow boxes of gold. In most cases, it's like going into a movie theater to buy a box of candy and some popcorn.

13:46They got you. Most people, Robert, lack the sophistication that you have. Now, on your end, it was trust of someone you've worked with for a long time. Sending it in to a dealer like me or your friend in Austin, who I know you're talking about, both good companies, takes more effort. You have to box it up and have to ship it by FedEx and go through all that nonsense. Rather, you throw it in the back of your car and go see your buddy down the street. That convenience is typically offset by less competitive pricing. In general, now I don't want to say all of them, but in general, coin shops do not have the ability that a company like mine does or a gentleman that you're speaking of in Austin does because they're long established companies that are doing millions and millions and millions of dollars of business a month and have the wherewithal to be able to write you a check for that and to even be able to inventory it after that fact because they can hedge the exposure.

14:47Whereas a local coin shop typically doesn't have that luxury, whether it be end of checkbook. I'll give you another example. There are a lot of people in those little coin shops that will, a guy like you, not you, but a guy like you will walk in and say, I need to sell this. And they'll say, okay, one second. And they'll go into the back room and they'll call me and they'll say, Andy, I have a guy in front of my store right now that wants to sell a half a million in gold. I can't really take that responsibility. Can I lock it in and immediately sell it to you? Sure. Go ahead and do it. Bang. He'll do that.

15:17They don't have the liquidity. It's all boils down to liquidity on that local level, Robert. And that's probably the biggest issue. So not as much as you would think. Okay. So we come back, we'll be going more into it about, like I said, it was my wife who caught it and it was really sad because I bought a lot from this guy. And I'm still friends with him and all this, but he wondered what happened to the business. But that's what I'm asking you today is, I guess it comes down to, this is my question that we can ends when we come back. Does it depend upon an individual that's a little guy like me finding a person like you who I just do business with?

16:00When we come back, we'll be talking more to Andy Sheckman, Miles Franklin. He's been in the coin business forever. I love his picture behind of him as nothing but the history of gold and silver and real money. Or as JP Morgan says, gold is money, everything else is credit. And so we come back again, it's like if anything else in life, what do you do business with? We'll be right back.

16:28Welcome back, Robert Kiyosaki with our longtime friend, Andy Sheckman. As some of you know, I've been a gold and silver bug since a long time ago, since Nixon took the dollar off the gold standard. I bought my first Krugerrand, a South African Krugerrand in Hong Kong, and I paid$50 for it, and I still have it today. And today it's worth about$3 ,500. So did the Krugerrand grow in size, or did the dollar go down in purchasing power? I'll let you answer that question. But for those who followed my work, I said, I don't save dollars. I save gold, silver, and Bitcoin, because I don't want to lose money.

17:06and the purpose of money according to my my teacher buckman's or fuller is the purpose of money was to steal your wealth fiat fake money they steal your wealth via taxation and inflation and uh so we have andy sheckman as a friend somebody i trust dearly so andy would you say it's as simple as that you have to find that dealer coin dealer that you have rapport with trust and they have a good track record. Yeah, 100%. And I don't want to say that the local shops shouldn't be, you shouldn't make relationships with them. You should. And they have an important role. Not everything is easy to send off.

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19:43Pursuing to a license from Visa USA Inc. Something a little bit more immediate. But yes, I mean, in an industry such as ours, Robert, this gold coin is the same whether you buy it from me, your friend in Austin, or the dealer in Phoenix. What separates in this industry a product that is homogenous is whom you're buying it from. But I think the most important thing to understand is that when you're dealing with an asset that is appreciating in value and you're dealing with larger amounts of it, you start to have fewer and fewer players who are able to provide that immediate liquidity and provide it in a fair way.

20:30Now, perhaps a local dealer would take that order, but thanks to him or herself, you know, look, I'm going to have to offload this immediately. I'm going to have to box it up. I'm going to have to ship it to that dealer wherever they may be in order to get paid. I'm going to be out the money for several days because I just gave Robert a check. And now I have to quickly turn around and get this shipped off. And that's going to take time and effort and money. So I'm going to make something for that. That's pretty much the way that they would feel. Okay, that makes sense. sending it back to me. Well, that's just part of what we do.

21:02It's hedged. It's done. Boom. I would be the person that that coin dealer may call to offload the responsibility of that order on because he or she would know. In fact, there are people that I work with that I will wire them the money. And this isn't the smartest business decision. But if that coin dealer was my friend and someone who I've trusted and worked with for a long time, he says, Andy, I got this guy in my lobby, he needs a half a million bucks. Can you help me? Sure. I'll wire you right now. You just send me the metal immediately. Okay, fine. So I will front wire the guy the half a million so he doesn't go three days with no money in his checkbook because I know that he'll send me that money.

21:41That's not the smartest business decision, but that's why relationships are so important in the industry on my side and why I wouldn't be so angry. Now, without knowing the facts. I can tell you, you can look as an example, and this is not outing anyone. J.M. Bullion, who is one of the most well-known companies in America, one of the most well-respected, I have nothing but good things to say about them. I'm going to just look at something because they published their buyback prices. And just to give you an idea of how low prices are right now, J.M. Bullion is owned by one of the largest distributors in the United States, in fact, in the world.

22:21And if we go to their website and hit sell to us and sell to us online, we can look at, for example, American Eagles, one ounce gold Eagles, they're bidding random years, 32.85. That's$50 behind the price of gold. I've never seen that in my career. Never. Now I would be higher than that. And I'm not disparaging J.M. Bullion. In fact, I think they're a fine company. want everyone to know that they are, but they published their bid prices. They're$50 back a spot. My entire career, you would have gotten north of two or 3 % over spot for those. And during the pandemic, as high as$200 over the price of gold based upon supply and demand.

23:04Now I look at this as a contrarian indicator where the public is missing the boat on physical, moving into risk on assets like nvidia at the same time that the world's exchanges from london to the united states and even shanghai are being bled dry by the most well-informed and sophisticated traders in the world that will its way down eventually but this is why the big money who understands things who's in the information closest to it is always ahead of the crowd and if you can see these players are one, two, three, four steps ahead of the retail market down here. But that had changed very quickly.

23:46And I guess I'm going to be the lone voice of defense for this gentleman, not knowing that any of the facts, simply saying premiums, I've never seen them this low ever, especially by a rep at a company like JM Bullion, who again is at the tip of the spear. This is my question because what people, everybody wants to know really, it's like I almost never sell. You know, I save and I don't sell. I'm an investor, not a trader. So I'm not in and out of the market. But silver is finally taking off again. What is your prognosis, your forecast, your optimism, your pessimism on silver? Because I love silver because silver is an industrial metal.

24:32It's used, as you always talk about, strategically for the military. Yes. And it goes boom and blows up and disappears. whereas gold is always here so i love silver because it's disappearing every ev has it all electronics have silver in it what is your forecast on silver i think today it's about 35 an ounce let's say yeah it's even a little higher it's above 36 right now it is uh 36 60 as we speak it touched 37 the other day it's the high at third it's the third time in history that it's been this high. There's been seven attempts to break 35 since 2011. They've all failed. This is the first that hasn't.

25:16If it closes the month of June above 35, it's incredibly significant. I believe you'll get the hedge funds jumping in at that point. From a technical standpoint, that's huge. We've seen the weekly close above it, in fact, above 36. With all of the the Fed announcements like the non-farm payroll and the interest rate announcement that's coming up in a couple of weeks where they're thought to, they're probably thinking of keeping the rates where they are. These are all big things leading up to the end of the month. We want to see a close above 35 or 36, but ultimately the only word that comes to my mind, Robert, is asymmetric.

25:57Asymmetrical in this respect means super low downside and amazingly high up. There aren't many assets that you can say that about. You could have said that about Bitcoin when it was$100 a coin. Very low downside. Amazing upside, looking back at it in retrospect. But I think that's where we are with silver right now. The reason I like silver is I'm betting against the government. In other words, I don't trust the Fed. I don't trust, you know, I like Trump, but can they stop inflation? I don't think so. So gold and silver are really nothing to do with anything else but inflation. Yeah, that's right.

26:36Inflation or tax. It's right. It's a hedge against the stupidity of our monetary policy and the irresponsibility of our fiscal policy. That's exactly right. The dollar is down 9 % this year. Silver is up over 40%. And so it's an environment where you're not buying gold and silver to become wealthy. You're buying it because it is wealth. If you own enough of it, yes, in those terms, you would be wealthy. but I think this is something that's very, very important to understand. You're the one who I credit with. I've said this comment a thousand times. You learn from Buckminster Fuller, you can't get out of the way of what you never see coming.

27:12And that's a very big problem here. People don't see the problem with the dollar that is coming. The de-dollarization trend is continuing and that leads to a whole slew of other problems. At the same time, the treasury demand is falling, which leads to higher interest rates, which leads to a slowing economy, which leads to all sorts of other problems. But music, food, art, these things define and unite us. And they come in colors that breathe culture, colors that connect us with their variety and richness. You'll find that same variety in Valspar Ultra Paints. Great coverage and durability starting at$29.98 per gallon.

27:50Enjoy everyday protection against scuffs and wear with a smooth washable finish. We're made of colors. And with Valspar Ultra, you can reflect that pride of culture you have inside on every wall of your home. Available at Lowe's. When I look at silver, I see some very interesting things. I see the LBMA, London Bullion Metals Association, which is a T plus one settlement system, meaning T is a trade day plus one to settle. Your metal should be delivered to you or moving on the third day. The LBMA says, no, we're so backed up with delivery requests it's eight weeks really t plus eight weeks when i'm expecting my metal in three days so if i can't deliver they cannot deliver for eight weeks imagine you own the kiyosaki jewelry empire and you're making jewelry all around the world and you source gold and silver bars in london so that when you need to fabricate your metal at the call of a top of a hat in three days your metal is moving to your to your refinery where you're making this stuff robert i'm so sorry man, we're at eight weeks because the Bank of England says there's not enough in the way of trucks or manpower.

28:54Really? The Bank of England doesn't have enough trucks to move my gold and silver. That's a problem. That's a default. Or whether we're seeing in the United States where the largest single delivery of silver ever in the history of the COMEX happened in May, or whether we're seeing China, which is the second largest producer of silver in the world, literally buying silver from all the miners directly in Peru, which disintermediates the marketplace. They're buying what's called dore and concentrate. Dore are the bars the miners make that are crudely refined, maybe 30 or 40 % before they send them to a refiner to be purified.