Silver liquidity and volatility
 

I have been fairly exercised recently about how quickly one's silver investment can be converted to cash. The 90% and 40% bags question suggesed some ease with a spread of under 3%-10%?

However, we must understand that liquidity is inversely proportional to volatility. What is the spread going to be like when silver is vaulting $5 a day? Dealers will be having nervous breakdowns over accepting large lots of coins in that situation. I believe the spread was more like 40% in 1979! I need to resolve that before I commit!

Silverity.

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Re: Silver liquidity and volatility
 

Hi Silverity. I sold a bit of silver 90% a while back and the dealer was happy to take it. It was a pain in more that one way to watch him count out all those dimes. Silver rounds would transfer much smoother.

As an experiment, I sold some silver Mercury dimes, some silver Roosevelt dimes and some one ounce silver rounds on eBay. To my surprise, the Mercury dimes sold for the same price as the Roosevelt dimes. And slightly below the $1000 face bag retail sell price. The silver one ounce rounds got a nice premium to retail as a PM dealer would sell for.

The dealers here in the Pacific Northwest seem to buy silver ounces at between 20 and 60 cents below spot and sell at 60 cents above spot. One dealer even told me that he doesn�t especially care to deal in 90% silver as the market is soft. A foolish attitude on multiple levels.

If I were able to pick up silver ounces at spot and sell them on eBay at 60 cents over spot, the profit after having paid eBay as well as Paypal and factoring in the risks as well as the price fluctuations, I would have to pass on this business possibility.

When the $5 per day vaulting come, I hope to be a spectator and not part of the precious metal Olympics. It may take some time for the price rise to stabilize before a reasonable price spread is established.

And besides, I don�t want to be selling to PM dealers if I can do so much better in bartering. Also, my gold and silver is the last thing I would want to consume.

Why would I want to voluntarily sell some of my silver ? As I have said in the past, necessity of paying for bills is one legitimate reason. Another is that the fiat money derived could be put to a higher and better use than holding silver. For instance, an opportunity to purchase a car for say, $3,000 and sell it soon thereafter for $7,000. Of course, I would be aware of the risk in missing the spot price of silver rising from $7.00 to $16.33 in the same time period for a roughly equivalent gain. I hope I didn�t sound too cynical about silver�s glacial movement in price but it is hard to remain unemotional in view of the opportunities I see. Also, I am probably over invested in silver in proportion to my not having the extra cash to transact opportunities without having to sell some of my silver.

It is good to be mindful that any silver sold for expenses or a profit becomes more difficult to replace later. At least that has been my experience. Well, just imagine selling silver now for $7.00 per ounce and trying to buy it back in a year or so for $21.00 or more per ounce. If the dollar had gone down by 2/3 or your wages had tripled at the same time, it might seem somehow fair but do you really think this will happen ?

And the government is always there, waiting to take a profit from your so called inflated profits. Say you had bought a house for $50,000 and twenty years later sold it for $150,000, a nominal profit of $100,000, right ? However, compounded inflation has cancerously Swiss cheesed that $150,000 over the last 20 years such that it has not gained one iota of purchasing power. The government only looks at the $100,000 nominal gain and makes no accommodation for inflation. So to add the insult of taxation to the injury of inflation, the poor home seller actually loses purchasing power while having the illusion of gaining. Cute, huh ?

And you can see why precious metals scares the bejeesus out of the government tax collectors; they can�t account for it and therefore can�t collect taxes on it. They would love nothing more than to squash it out of existence. Does anyone think that they will call in the government to be witness to any bartering transactions ? I suspect that the use of precious metals in daily commerce would cause the starvation of government, at least the overbloated monster we have today. Without weekly paychecks, how long would it take before the exodus created a ghost town of Washington ?

Am I making it clear what I think of government�s use of fiat currency to control the average citizen ? We don�t have an elephant in the living room which everyone is ignoring; we have an internal parasite which is sapping off the life energy. I fear that this parasite has become so large that it has effectively disabled productive activities and if left untreated, will soon kill the host. We already are not competitive in many world markets. We even risk loss of manufacture of domestic automobiles as we see General Motors and Ford pension problems in the news lately. What�s next, outsourcing to India the drive by food order clown at Jack In The Box ? Or did I miss that already ?

Maybe my rants will give you some material for future articles or at least serve as warnings of what not to write about. Ha Ha

Best wishes,

agnut

Re: Silver liquidity and volatility
 

In the future when silver is going up $5.00 a day and everybody is buying silver...

Thats when you want to sell some of yours!

MLS

Re: Silver liquidity and volatility
 

Hi Maple Leaf Steve. Good advice there. How about if I unloaded enough silver such that the fiat cash was equal to what I had originally paid for all my silver, plus a little interest ? Say silver I bought at $5 goes to $55 and I sell 10% of my stash. Then what silver I retained could be treated as if it didn�t cost me anything but a good judgment call and some patience. I know that some wouldn�t be content with this frame of mind but I would be and that is what works for me.

And when Silverity�s $750 per ounce silver comes in a winner, I would still have 90% of my original silver hoard. And $55 is only 7.3 percent of the potential future of $750. Let�s see, every 5,000 ounces of silver at $750 comes to $3, 750, 000. Something to think about. Folks who won�t buy silver today because they think it is risky will one day find that it was risky to have not bought some silver.

I have used this technique over many years and it has given me profits as well as peace with my decisions. I suppose I could have made more money by being more aggressive but I have always tried to enjoy my work as much as possible. I remember one trip where I took an old rodeo cowboy buddy with me and we flew into Houston. By the time we reached Phoenix we were ready for a break from the dirty work. We checked into a hotel with a swimming pool where we had to swim underwater to get to the Coronas at the bar. As I said, ya gotta have fun along the way. Even a little hangover was fun in those days but not any more. My most profitable transactions all required patience. One even took a couple of years to complete because I didn�t know the right buttons to push in order to �get the candy out of the machine�. I remember afterward that I was both proud and ashamed. I still laugh about it even though a profit of about 50 thousand hung in the balance.

As an indication of how our perceptions since becoming precious metal investors have changed, think of the expression, �Laughing all the way to the bank�. When I withdraw dollars and go forth to purchase precious metals, I think of �Laughing all the way from the bank�.

And besides, if the banks in the future have to limit withdrawals to $200 per week as was posted as a concern before Y2K, would we see depositors, �Crying all the way from the bank� ? Laughing or crying, it�s all a matter of understanding, timing and planning I suppose.

My lifetime of horse trading and years of brokering put me in a great position for the future. I have been encouraging others to begin to learn these skills since the future may heavily rely upon how good you are at bartering. In the future, a large amount of precious metal may be only part of the solution .

Best wishes,

agnut

P.S. Not braggin� but I have been advising for some time to get a diesel car (my favorite is a V.W. which gets 50-55 MPG) as backup and now the news is all about $3 and up per gallon fuel. Next we will probably see no one who wants to sell their diesel car. Might be a good idea to pick up one cheap before it�s too late. I bought mine about a month ago for $150 and he drove it over to my place. It needs work but at least I have it. Wish I had 50 or 100 of them for the future.

JMHO

Re: Silver liquidity and volatility
 

"Everybody is buying silver"? Please explain? People don't buy silver, that is a fact. There is not a great relative amount of personal luxury use for silver. When gold becomes overpriced and scarce on the market. Then jewelry will turn to silver. Currently 5,000 or 6,000 tons per annum is used by the jewelry market. In a high priced gold scenario, that would change jewelry consumption of silver to something higher. Maybe triple the luxury demand. This'd take out the current production of silver. But with silver there is plenty of spare capacity to come into play. The price would fall again to $50 to $100.
This is silvers only luxury market. If that demand was maintained, then silver would act like money. But how long would the gold scarcity last?

Re: Silver liquidity and volatility
 

In 1979 and 1980 when the price of silver and gold was rising rapidly on a day to day basis there were alot of people buying and selling silver and gold in this country.

There were long lines outside of coin shops where people waited to sell and buy silver and gold. Silverware, bullion, 90%, gold teeth, you name it...

Some coin shops and precious metal dealers would not allow you to buy any silver and gold from them in 1979 and 1980, but you could sell your gold and silver to them. This actually happened in this country!

So when this "panic mode" happens again at some point in the future you may want to "take some off the table" anotherwords "sell some of yours" when everybody else is buying and the price is going up drastically.

Then put the cash in the bank and draw 20% interest on it.

The interest rate in 1980 was around what? 22% I think something like that...

Remember...

"Gold is not a hold" and neither is silver.

MLS

Re: Silver liquidity and volatility
 

In 1980 when I sold my silver I bought everything that I ever wanted, house, dogs, wife, boat, cars and a lot more but this time around I have it all therefore I am in deep trouble, what the heck would I buy?

Any ideas? I could added to the ammount that I already have in order to help the Palestinians in starting a business in Palestine once they are more or less free but I really don't trust the Jews and they might steal it all.

Will see, time will tell.

Re: Silver liquidity and volatility
 

Agnut,

Like I said elsewhere, it could depend on government action/reaction. All I would say is that ebay could be a great boon for sellers of gold and silver who once had to rely solely on dealers. Mind you, how long would you set an auction for when silver is increasing $5 a day! :)

Re: Silver liquidity and volatility
 

Re: Silver liquidity and volatility
 

Listening to the radio I am hearing "California Dreaming" by Mama's and Papa's.........Silverity......your comments on silver up $5.00 a day are just that..............I see silver testing $6.00 this summer...........maybe sooner............glta.........

Re: Silver liquidity and volatility
 

The $5 jumps are a bit off yet. Yes, I can see $6 or lower being tested.

Re: Silver liquidity and volatility
 

As hopeful as I am about silver, I'm just waiting to see my first $1 increase in a single day ! :proud:


....as for the $6 mark.....I'm looking to see $6.50 being tested in April. After that, I'm hopeful it'll reach $8 by May 30th.