Wednesday, May 11, 2005

 

Coins are lousy investment - Part IV: Hats off to the Blade

Apologies and kudos to the writers at the Toledo Blade. We have heard from a couple of apparently better-read readers that Blade reporter Chris Kirkpatrick did exactly the kind of analysis that we had criticized the Dispatch (and by implication, other papers) for failing to do. And, even better for our ego, Mr. Kirkpatrick comes up with about the same return we did (our rough estimate: 4%-5%) -
Because of the risk, numerous experts have told The Blade they believe rare coins are not a proper investment vehicle for public money. But the state of Ohio and its Bureau of Workers' Compensation Fund have chosen since 1998 to invest $50 million in two rare coin funds - Capital Coin Fund I & II - set up and managed by Tom Noe, a local coin dealer and prominent Republican fund-raiser. No other state has invested money into such a venture.

The return from Mr. Noe's funds has averaged 4.5 percent a year since 1998 for the first fund and 6.8 percent a year since 2001 for the second fund, according to state records based on numbers submitted by Mr. Noe.
Getting 4.5% one year for a high-risk investment is alarming. Getting it for two years is so alarming that it should have put the investment manager on the "watch" list. Getting 4.5% for three years should put the investment director on the "watch" list. Getting it for four years should put the BWC director on the "watch" list. Getting 4.5% for six years is more than enough to get them all fired and them and the Workers' Compensation Commission possibly sued for failure to uphold their fiduciary responsibilities.

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