Unpopular Opinion - My PM Story
Pedzola
Posts: 1,027 ✭✭✭✭✭
Back circa ~2008 I bought my first handful of silver coins. Was caught up in politics at the time. My particular brand had a lot of hype about inflation, the protection for which was to buy PMs.
Finished grad school that year and started my first real job. So I didn't have a lot of $$ at first. I thought PMs were a good investment as I saw the prices rise from 2008-2011. As my income and confidence grew I put increasingly more $$ in as prices rose.
Then came the big crash in pm prices. My average cost for the silver and gold in my collection was something like $35 and $1800. At first I started aggressively buying the drop, but prices kept going south, and stayed there for years.
Was inflation real? Yes as far as I can tell. So why the huge drop from ~$42 to ~$14? I really thought I was doing the smart thing financially. I felt pretty burned.
I kept buying a bit here and there but eventually around 2018 I decided that "stacking" was a losing proposition. I would have been infinitely better off if I had put my $$ in the stock market.
So I stopped buying bullion and started converting all of my holdings into numismatic coins. (Probably around when I joined the forum here). The simple thought process was, I already have this $$ in "coins" I might as well turn them into an interesting collection to look at vs tubes and bars.
At that point coins stopped being an investment for me and became a hobby. Not that $$ isn't a part of it, but the objective is satisfaction in having a nice collection vs wealth accumulation. I traded a lot of my bullion in 2018 and 2019 at prices far less than I paid, and have continued to put $$ into "rare" coins to build my type set through present day. I am immensely enjoying numismatics and the hunt for rare coins. But from a dollar perspective, even with price increases on my current collection I believe I'm still likely in the red from all the bullion I lost so much $$ on.
So I look around today and see the stacker culture is still alive and well, maybe even on overdrive. I witnessed people in my local shop just yesterday buying gold and silver eagles at massive premiums. Have seen rumors about billionaires influencing the market, investment gurus saying silver prices are going to the moon, complaints about market manipulation keeping prices low, and people on social media showing off their stacks and trying to convince others to buy into their "strategy." It is all identical to what I experienced 2008-2012, it all leaves an incredibly bad taste in my mouth reminding me of how I got caught up in that culture where the answer to every bit of news was always to buy more silver or gold.
I have a track record of buying high and selling low so maybe I will ultimately be proven wrong (maybe I just needed to wait another decade or 2). But for me, PM's were a huge drag on my personal financial situation, probably putting me years behind, and I'm happy to put that period in my life behind me. I'm enjoying collecting coins for other reasons.
I'm sharing my story here in the hopes that other people will be able to identify with it and maybe rethink the importance of PM's to their own identity, finances, and outlook on the future.
Collecting is great fun, and if you just love to feel like scrooge mcduck with a pile of bullion, awesome. If you are trading the ups and downs to make $$, also great. I just hope that people out there are not signing up to a belief system that expects a paradigm shift of PM's replacing global currencies and metals outperforming all other investments. I used to believe this, and I know many people do today. I'm glad I was able to admit that I was wrong and move on with my life.
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It's how the gutter salesmen survive. The story never changes, it's the same BS decade after decade. hyperinflation, the economy is going to collapse, the world is about to end, we're all about to be running around swapping a gutter dime for a loaf of bread blah blah blah. Better get some now before it goes to the moon. There's no shortage of fresh meat for them to pray on. They cycle continually repeats itself.
I still hold metals and I actively stack when conditions are right. I do so for diversification and perhaps a bit of "insurance", but I certainly am not sitting around the bunker hoarding all my $$$ into metals waiting for the world to end. This reddit crew are in for a rude awakening. I suspect in a time not too far from now I will be buying their massive premium metal off of them for spot or less. RGDS!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Sympathies. You bought low, had a chance to triple or even quadruple your investment in less than five years and did not sell? Sorry, but you sound like blitzboy. You too now have an excuse to call it gutter metal.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
LOL, you've been losing $$$ for decades. Stack on Ace.
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Because you cry about losing money, does not mean others are as helpless.
knowing how to turn a profit while prices are high is apparently rocket science to some. LOL
At least you gained a sympathizer.
HINT: there's a time to stack (low prices) and there's a time to unstack (high prices). Nothing to stop one from re-stacking when prices drop. once again, Buying low and selling high is not a one time event, especially in volatile markets. The expenses of trading physical metals only means that greater profit margins are needed to justify trades.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Not so precious metal.
What a good read. And a moral to the story:
"A bad habit turns into a good hobby".
There's another underappreciated factor that is banging on precious metals now. For the past several years, return rates on savings have been at, or nearly at, zero. In the past few months, inflation has been rampant. But suddenly, returns on savings have awakened. It's now easy to get upwards of 3% at "online only" institutions. It's a guaranteed, fully insured, return; and rates continue to increase steadily. No, the rates don't yet stack up well (pardon the double entendre, please, PM fans) against the rate of inflation. But one can understand the attraction for those not wanting to expose their savings to risk.
Coinlearner, Ahrensdad, Nolawyer, RG, coinlieutenant, Yorkshireman, lordmarcovan, Soldi, masscrew, JimTyler, Relaxn, jclovescoins
Now listen boy, I'm tryin' to teach you sumthin' . . . . that ain't an optical illusion, it only looks like an optical illusion.
My mind reader refuses to charge me....
I’ve also pretty much gone the numismatic road. A lot more fun honestly. I like stacking, but under $20/oz on the silver out the door, otherwise I’ll just go with the numismatic stuff.
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Hint: Thats what paper is for. Why on earth would anyone stack and unstack something with such a premium spread that you are buried underwater the second you stack it. It's not rocket science Ace. Although apparently to some it is. LOL
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Many here built their stack of high premium silver before it became high premium silver and have been selling at a profit even in the face of lower spot. I for one continue to sell this premium silver at a profit and am replacing it with lower premium, lower priced silver of the same .999 content. I do expect the silver premium fire to spread to more silver products as this disastrous economy plays out. I was correct in giving priority to and recommending ASEs and 10 oz. RCM bars over the years. They are now among the higher premium products. I feel my prediction for higher silver premiums across the physical board will play out the same.
Why buy physical instead of paper? I buy paper ETFs for the planned, quick plays on volatility. I buy physical silver for dollar protection with the expectation of holding it long term. However, when I can sell the physical at a nice short or intermediate term profit I will continue to do so and replace it with lower premium physical (at a cheaper price) that offers the same long term insurance.
Do not lose sight of the #1 rule: stack low, unstack high. Listen and learn, grasshopper.
Concerning numismatic PMs - The right gold coins in high grade, particularly moderns submitted by the mint purchaser, can provide nice returns. As I have stated before, these profits form a great basis for stacking silver without the full out of pocket expense for the silver. My particular experience has resulted in stacked silver way below market prices, thanks to the gold coin profits. A silver stack partially funded by other profits makes for a very cheap stack and can be the literal difference between gutter metal and diamond metal.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
I can relate to the OP. Silver in particular has been a horrible investment for me. It has not been a store of wealth, doesn’t protect against inflation, and has just eroded its purchasing power over the same period that the OP described 2010-present.
Contrary to popular belief silver has provided numerous buy and sell opportunities over the past 20 years that resulted in profit.
Silver is not going to go up high and stay high and it is not going to go down low and stay low. Buy and sell your stack accordingly. While you hold it let it serve as dollar protection.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Think of it like getting on an exercise bicycle. You're not really getting anywhere, but you obtain the benefits of pedaling /and dollar cost averaging in (on those cyclical dips) So I sweat sometimes. That's the whole idea.
I just do both. If I get silver from not much of a premium I go that way.
bob
Interesting experience and one that is probably not unusual. I appreciate your candor. Lots of people would never admit that they bought at a difficult time in the market and "lost" money.
I can only add that I'm not sure how much your experience was inflation or any fiscal policy. Rather it seems to be one of timing.
I would not have backed the truck up at $35 per ounce for silver. At that point, baring hyperinflation, the silver ship seemed to have sailed. In fact I would probably have tapped the brakes on dollar cost averaging in the $25 range. No crystal ball or complex market analysis. That just feels too high to me.
As I type, silver is $18 something (at least for paper). That doesn't seem too outrageous. I'd be comfortable DCAing in that range if I needed it. Silver could drop $5 or even $10 per ounce from there and I'd still feel like I had a degree of protection against inflation.
But I don't trade paper metals. And I'm not looking to "make money" on my PM purchases. They're there to back up my other assets--ones that actually earn interest, dividends, or at least appreciation.
PMs are interesting, shiny wheel chocks. They stop all the other stuff from rolling down hill.
--Severian the Lame
Wow that’s what happens when one listens to the gurus and wannabe gurus who want to sell you pms, truth silver offers zero protection against inflation that’s just a false mantra of the hucksters…
If one identified silver as a potential investment at a particular time then a simple buy of slv would have provided max returns with zero premiums.
What’s the only “asset” ( forgive me for possibly being derogatory to real assets) you can buy that’s cheaper than it was over 40 years ago? Only the Gurus know…
"Zero protection against inflation" ?
That is not the case at all.
In the long run, silver (like many commodities), has kept up with inflation. But, being volatile like it is, there are times when it jumps way ahead of the inflation baseline and there are times when it lags considerably. But the overall trend is about the same as inflation. A silver quarter could buy a gallon of gasoline for much of recent history (including right now).
For your narrative, if you want to pick one of the two times that silver (artificially) spiked to about $50, then that is very misleading. There have been plenty of opportunities to purchase silver when it was below $20.
Due to the way SLV is structured, over time the amount of silver represented by one "share" of SLV diminishes.
So I would never consider SLV for a long-term holding. But for short term trading it is ok, I suppose.
I think that the OP's mistake was the misconception that metals only go up and never down over the long haul. When you start buying into a long term position, you can expect both ups and downs but as long as you think the fundamentals are in your favor, there is no reason to deviate from the plan.
It appears that his mistake was to jump into the position with both feet and then to press forward, and then - to drop out when the expected result didn't take place, especially considering what the alternative (stock market) was doing at the time. In other words, his timing was unfortunate. But, was his take on the fundamentals wrong? I say no, and the fundamentals are now even better for precious metals than they were during his timeframe of 2008 to 2018 in spite of a flat or fluctuating market in precious metals.
I recall that when I had my first real job after school, there was an incentive to make it big with investing. The fact is that when you are in your 20s and 30s, it's hard to execute a long haul plan that has good fundamentals because other trends always jump to the front of the line. And off you go, with the herd. That's exactly what he has done now. In my opinion, that's another mistake on his part. There will be a time when stocks get absolutely crushed, and that time may be relatively soon.
The point of building a longterm position is that it grows into something significant over the long haul. You can do it with stocks, or precious metals, or real estate, or a small business - but it almost never happens overnight. Almost never. In 1979, I was buying gold mini contracts on margin when precious metals were on fire. I was lucky, but I was also young and didn't think about the negative impacts if the market had turned against me at the wrong time. If it had, I would've probably come to the same conclusions as the OP.
So, if I were just starting out today as a precious metals believer, but with the knowledge and background that I already have, but nothing invested - what would I do in light of the high premiums?
No two situations are the same, nor are an individual's circumstances the same as anyone else's, but first I would have a long term plan in mind. It's been discussed here from time to time, but it's called dollar cost averaging.
High premiums could be telling us one of two things:
1) It' a temporary supply issue and when it resolves itself the premiums will come down and buyers at these high premiums will be caught in a trap with no escape in the short term.
2) The market is very tight and the high premiums reflect the real market for physical silver in spite of gross manipulation, while economic conditions are bad and getting worse.
Regardless of which scenario comes down, dollar cost averaging gives you control as you build a position. By its very nature, you buy more when the price is low and less when the price is high (including when premiums are high).
The OP shot himself in the foot by dollar cost averaging on the way down, and then selling out. At least he got a satisfying hobby out of the experience.
I knew it would happen.
Helping a friend sort out coins here parents purchased as investments back in the mid-80's. The coins are in a fancy folder with pictures and a story on each type of coin. She doesn't know what they paid or why they even invested in coins - seems like they made several purchases over a few months and that was it.
Most coins are MS63/64 and raw - a couple dozen Morgan and half a dozen peace and a couple Walkers. Did a search on Morgan prices 1986 (when they were purchased) and it appears there was a price spike and they decided to join the herd. It appears 35 years later they will break even on their purchases.
Not sure if there were times during the last 35 years these were higher and they could have sold for a tidy profit - but it does seem another example of a rapid price increase of something neither new or rare rarely pans out
If PM's were purchased over twenty five years ago.... And a portion sold at peak markets about twelve years ago to cover the original total investment... The rest of the stacks could be pure profit. Cheers, RickO
Thanks all for the interesting comments. I guess my whole story was just a warning about drinking the kool-aid like I did. I was engaged in an ecosystem that promoted PM stacking above all else. I didn't intend to buy and sell like DB proposes I should have done - Gold and Silver are money so why would you exchange them for "fiat?"
So I hope that by sharing, if I can help someone else to reflect on their own motivations and expectations of buying PM's, thats all I am looking to achieve.
I am extroardinarily bad at investing. Everything I touch turns to dust. Someday I hope to sell a coin for a profit. lol
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I thought you posted and excellent thread...Stacking Silver, with a high premium, is one of the Worst Investments possible...
Great post jmski…
Thanks for posting a very Personal Story... that took guts & it was a great read - I'm sure there are others that have very similar stories.
I'm reading the moral of the story is to make ones self "Happy" while also remaining true to ones self... You were happy stacking Silver after 2008, but it was done for the wrong reasons, perhaps fear based (SHTF).
Now the world of numismatics offers you enjoyment, but in more of a personal journey, hobby, and investment (I put that one last on the list)
Some comments here can come across as "you should have done this/that" but I will say If the bullion was a proverbial thorn in your side, maybe that was a good move to rid yourself of it and move on... one less source of contention in the SDB at least...
I wish you luck in your future collecting habits, and most of all keep havin' fun
It's all about what the people want...
Same opinions by the same posters. The more things change, the more they remain the same.
Monty, I'll take door #2.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
@dcarr Due to the way SLV is structured, over time the amount of silver represented by one "share" of SLV diminishes.
So I would never consider SLV for a long-term holding. But for short term trading it is ok, I suppose.
So true. GLD has a longer track record. One can easily see the price difference between spot and GLD since what 2006.
SLV and GLD follow the spot price of gold. There are no rising premiums as found with physical metal, While physical metal prices divorce themselves from spot prices, the ETFs will remain at the mercy of spot price. But yeah, if you know gold or silver will jump tomorrow, the ETFs are a good quick play.
But if that spot price is in fact being controlled, then the same applies to the price of your SLV and GLD. The other issue with these ETFs is that the physical metal backing them is being stored in the corrupt exchange's vaults. Is it there? What happens to the price of the ETF when the public learns that it has been used (leased or sold) for other purposes?
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
The liquidity on a lot of physical is poor. That's why the bid-ask spread (not the premium) is so wide, wider since 2020 percentage wise than any time I remember.
Yes, I know it's easy to sell. Practically anything usually or even frequently bought for financial reasons can be sold quickly if the price is discounted enough.
The question I have asked here and elsewhere before is this one. If the demand is as strong as commonly claimed, why don't market makers (dealers) reduce the bid-ask spread and try to make it up on volume? I presume they have no trouble selling the inventory they have, but it would certainly make it easier to acquire more inventory. The only answer I can come up with that makes sense is that they can't hedge or it's uneconomical.
As for the spreads returning to "normal", the answer is really simple. Most physical buyers fitting the profile of those on this forum aren't going to sell unless there is a big price run-up or it becomes necessary.
What kind of conditions would make it necessary?
An extended period of tight financial conditions coinciding with a deep recession or a depression. We haven't had one in my lifetime, but I still think it's coming now that the interest rate cycle almost certainly turned in March 2020. It's not like most middle class metal buyers are affluent and can hold out.
Closest one was probably in the early 80's when silver crashed and unemployment first spiked post WWII. The GFC was deeper and so was COVID, but both didn't last long enough to force many to sell or liquidate due to the global asset and credit mania.
Answer: most silver is in strong hands not willing to reduce the high premium ask.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Gutter is not rare, there is way more supply than demand. A few fancy little trinkets are not representative of the overall gutter market. Premiums have been heading south and they will continue to do so. The high premium crew will be in for the shock of their lives. Some here will still be sitting with their green boxes in the bunker 25 years from now claiming the Comex is about to break. lol
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
@blitzdude said: "A few fancy little trinkets are not representative of the overall gutter market."
This is the point. The large industrial buyers are paying spot plus modest transaction costs. Are any of them finding it hard to get their hands on silver?
@Pedzola said: "I am extroardinarily bad at investing."
This is true of many people from all walks of life, though few are as willing to admit it. Most people don't have the time or patience to invest well. Most bad investment decisions are made rapidly, intuitively, and with a big dose of emotion or wishful thinking. Unless someone has a lot of time to devote and can approach it dispassionately, the best way to accumulate wealth is to work hard, save a lot, and diversify your holdings.
I fit perfectly into this category. Fortunately I've had time on my hands. Like my man Red said in Shawshank: Time and pressure.
Bought a rental property or ten 30 years ago. All of the sudden they're worth 8 times what I paid for them.
Bought some really good coins 10 or 15 years ago. Suddenly they're worth multiples of their cost.
Backed the truck up when silver was $8 an ounce. I'm a genius because I sold some at $30.
Consistently invested in my 401k. Overnight (and several decades later) it's quintupled or better.
We bought a modest ranch house when we first got married. Paid it off in 20 years.
All of those were overnight genius moves that actually happened over decades.
You hear these stories about the old couple who liked art and bought post war paintings for a few bucks to help out the guy who lived above their garage and now it's worth a million. Guess what? Those stories are true. The art, the antiques we bought when we were a young couple are worth tons more than we paid. Inflation, appreciation, supply and demand. And lots and lots of time. Time makes an idiot like me look like a genius
--Severian the Lame
That is not how a market works. The price of something always seeks a level at which supply and demand are nearly equal.
So at any given market price for silver, it is more accurate to say that supply and demand are balanced.
Reminded me of the man prayer from the Red Green sitcom.
"I am a man. I can change, if I have to. I guess. "
If the demand is as strong as commonly claimed, why don't market makers (dealers) reduce the bid-ask spread and try to make it up on volume? I presume they have no trouble selling the inventory they have, but it would certainly make it easier to acquire more inventory. The only answer I can come up with that makes sense is that they can't hedge or it's uneconomical.
It won't make it easier to acquire more inventory because they are paying high premiums on any new or replacement inventory if they are trying to fulfill an in-house order. They can't hedge because trying to hedge a physical position with a Comex position doesn't account for the premiums on physical, i.e. it doesn't help them replace inventory and once inventory is gone, they are dead in the water for any further transactions.
I knew it would happen.
Maybe I wasn't clear? If the spread is $8/oz as it is at the larger sources I check (on occasion), they can raise their bid by (as an example only) $2 to shrink it to $6.
I state this as it should be evident that the outsized buy-sell spreads (not the premium over spot) is an impediment to the public selling their stash.
As a retail buyer, I care a lot less about the premium over spot versus the buy-sell spread. I expect spot to decline from current levels, but I might buy it anyway if the spread is more consistent with prior history. OTOH, no way I'd ever buy bullions coins like the ASE now when it involves an immediate 20%+ "paper" loss. Silver's financial proposition isn't remotely compelling enough.
You provided an example of a source which has narrower spreads in a prior post exchange, but I doubt it's representative. If it was, the sources I know would be out of business.
They can't hedge because trying to hedge a physical position with a Comex position doesn't account for the premiums on physical, i.e. it doesn't help them replace inventory and once inventory is gone, they are dead in the water for any further transactions.
I know it's an imperfect hedge. It's always been imperfect.
This is where I disagree with you.
An extended period of adverse economic conditions will expose how financially marginal most "metal bugs" actually are turning them into forced sellers. Better off presumably than the general population but that's not saying much of anything. Most of these people almost certainly aren't that affluent where they have enough liquidity or economic resources to outlast an extended period of unemployment or a big downturn in their business. Enough of them will be forced to sell by necessity or do so out of fear of much lower prices.
Few of the actually rich own meaningful amounts or even want to own the physical metal. They may wish they owned it later, but that's another consideration entirely.
What I find most interesting on subjects like this one on forums like this one is that there is no shortage believing in harder times for the general population. Concurrently, it's always in the abstract.
It's ironic that the lower living standards believed to be in store for most everyone else seemingly never apply to those making these claims.
yet premiums tell us there are far more seeking to buy than seeking to sell.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
If this post was in reply to my last one, apples and oranges. My comment was on the claim of metal buyers supposedly being "strong hands" under adverse economic conditions.
What reason is there to believe that?
It's one thing to be an accumulator during "good times" and another entirely when this asset mania is confirmed as over when most or all asset classes are falling or crashing.
Strong hands are holding quality silver products. Otherwise their prices would be much closer to spot.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
That's not evidence. That's your assumption.
It's at least equally likely that they hold the (hyper)inflationary belief and never considered what I wrote in my other posts. They are so confident that much higher inflation will lead to much higher prices first, it doesn't register with them that the financial system is at greater risk of a deflationary crash and the much tighter financial conditions that go with it will turn enough metal holders into forced sellers. They hold the erroneous belief that financial market participants act like robots which will lead to open ended "printing" to preclude this outcome.
No one has exact knowledge. I don't believe that most metal holders are in a position to outlast extended adverse economic circumstances. I could believe it like you do but I don't because I concurrently have no reason to believe these people are particularly affluent or that their economic position sufficiently differs from the "mass affluent" segment of the population. The "mass affluent" who aren't metal holders aren't in a position to sustain extended economic adversity either.
It's more reasonable to believe that most metal holders have individual modest holdings and with median net worth/median household incomes somewhat above the population but nothing more. Their willingness to pay historically abnormal premiums is more indicative of their psychology than economic position.
Since all prices are set at the margin, it doesn't take that much marginal net selling to lower prices and bid-ask spreads substantially. This is true for any asset, not just metals.
Some recent anecdotal "evidence" :
I had a table at the recent 3-day Denver Coin Expo.
It was fairly well attended by the public. There was a fair amount of fancy silver bullion products available from dealers. There was a modest amount of 90% "junk" silver available. There were not many Silver Eagles to be had.
With the high premiums on Silver Eagles you would think that people in the general public would come in to sell their Silver Eagles. I didn't see anyone from the public come in to sell gold or silver, Silver Eagles or otherwise. I did see a fair amount of buying in 999 silver products other than Silver Eagles. I didn't see anyone buy any Silver Eagles, but that was probably due to the fact that there were not very many Silver Eagles there, and there were other types of 999 silver products available.
Unless they have previous experience to know that they will be offered spot +3 to 5.
One would think that if there was strong demand for a product then sellers of that product would have large inventory to sell. Why lug around all that weight just to see it languish in the case?
How many 10 oz bars did you see?
Knowledge is the enemy of fear
What @ricko said! Purchased 9 Double Eagles and 1 Peace Dollar 06-02-04 ($5425.00). Sold the 3 ugliest Double Eagles 09-14-11($5494.75) Profit...
@wozymodo... Welcome aboard and well done!! Cheers, RickO
Nice play! BTW, that is a nice 1921 Peace.
Well done! 👍
And welcome to the forums.
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