Funny Thing Happened At The Coin Shop

Be reasonable you blokes.
The dealers were probebly flat out trying to buy in the dip yesterday and trying not to sell at a loss, Same as you's blokes.
They are in this to make a living, We are there to invest a wee bit of spare cash and have some fun on the way.
So give them a break they will be reasonable 99% of the time.
And NO I am not a dealer, Before you ask

Got off work early on Friday and decided to go to the coin stores. Went to the three major ones we have. One closed. Next one had 9 various 1 oz coins (maple leaves, kookaburras, pandas, etc). They were all out of silver rounds. Normally they have a huge box of them by the cash register. Not on Friday. Went back in on Saturday and they had a few rounds in the box. Third store had some rounds and a few 1 oz coins. Other than than both stores had various smaller silver coins (90% US and commemortives, Canadian, Mexican, etc.) At any rate, they were mostly sold out and nothing was in the display cases. Both places were selling for spot plus a small premium depending on what you bought. About a dollar for a silver round up to 4 dollars for new ASE.

When the spot drops, you need to buy from brokers, not dealers. It's not fair to expect a dealer to lose money on a sale due to lower spot, since he (like you) know that he can hold it for a week or two and at least get his money back, because the overall market is rising.

Also, when the spot drops, the first thing that happens is people stop selling. If a dealer doesn't have it coming in, he can't very well sell it.

I may check the dealer I go to. He usually does have junk coins and American eagles but who knows. I was lucky to get some last friday

I see a lot of comments about it being unfair and unrealistic to expect dealers to sell at spot when the price goes down.

Lets look at the fairness of the matter first. As a dealer I buy at one to two dollars under spot and sell at spot. If on a given day spot is $30 and I buy at $28, and then the price swings up to $34; is it fair for me to sell at $34?

It is if my prices also come down when the spot market goes down. The same thing used to happen with Gas prices. OPEC tied the price of crude to the spot market in the 80's . Until very recently the pump price went up or down with the change in spot. Recently the price went up with the rapid increase of the spot price. But; when it came down the pump prices stayed up. A Government Panel submitted a report on this saying they don't know why the prices are still so high. BUT they have a nifty new term for it; Asymetrical pricing. I just call it greed.

Back to my point on PM's. If my prices come back down to reflect the spot prices then I am being fair. Especially because in a long term Bull market I am going to make money on THE AVERAGE of every sale.

So if my prices don't reflect the drop in spot I am NOT being fair. I am in fact being greedy.

The second point; realistic versus unrealistic is probably more valid.

If spot is at $41 and I am buying at $39 and the market washes out to $28; what should I sell at? For my regular customers that are making small buys I have no problem selling at spot. That Silver dollar; those $10 dollar face in Halves; the 30 dimes; all those are at a loss, but the loss is minimal and I keep my customers happy. And lets face it, it is all part of the game.

But, do I sell those three bags of $1000 dollar face at this price? The truth is I could lose as much as 23k on the deal.

So, no; large purchases are unrealistic. Lets also be totally honest. Based on my past practice of tieing my buying and selling, prices to spot; it is NOT FAIR of me to now not do so.

Just wanted to point out that fair and realistic are not equal terms.

Its Fair if I use spot as my gauge both high and low. You can't expect to make money on every deal. If you do, you will probably be out of business at some point. Though you may have one heck of a run while it last!

My point was there is a difference between "fair"; which is an ethical consideration; and "realistic" which is the real world business consideration.

AS to your point about losing money on those 20 transactions, well sure I will. But that completely sidesteps my other point of making a profit on the average of all my transactions during a Bull market. Ok, so I sell a hundred ounces and my sells total a thousand dollars less than I would have made last week.

The trick is not to think of the individual sell. In other words, my thought process is not "Gee, I bought that dime for $3 and I just sold it for $2.20. OH NO, I just lost 80 cents!" ( or whatever multiple).

Rather the thought is that the average price per dime I have paid over the last 20 years is still closer to 50 cents and I still made a $1.70 in profit.

If that market comes to an end, and they all do, then I need to take a bankers holiday, assess my losses and move on. If you can't absorb the occasional loss you probably should not be in business. It is all part of playing the game and getting your timing right.

And finally I think I answered your last, but my rule of thumb this last week is to make transactions of $100 or less. Except for silver dollar culls which still sell for a slight premium. It has not been a big deal. Most people who want to buy, really want to buy in quantity. And I am not selling bag quantities right now. I have read where some of the Technical people are fore casting a possible bear market in November. They are split on whether it is a short term bottom before it goes back up or whether it is the beginning of a downtrend ala 1981. If the first then sitting on my inventory makes sense. If the latter than I should sell now to prevent taking even more of a bath.

Of course those of us that remember 1981 remember how "everyone" who was anyone, were telling the rest of us to BUY BUY BUY, because it was only going to go back up, up and away!

Alot of people have lost a lot of money on the PMs, not just this week, but a couple of times this year. I think that will shake out the weekend investor. Gold and Silver are no longer viewed as sure things. How many web sites advise that you need to manage your ETFs on a daily basis? Sally Investor wants to put her money into something, walk away; come back in a month and take her profit.

Unrealistic expectations? Well, yeah.

Realistic behavior? Heck yes! That behavior defines 90 percent of the population.

I ask; who has lost a lot of money this last week? And what are they going to do about it? Will they throw good money after bad? Did anyone make a large profit shorting the market?

If I knew with a certainty where the market was going I would have more money than Gates and Soros. But I don't. So do I sell now and reduce my long term losses? Or do I hold ( for what might be years) and wait for the price to come back up?

Fred,

We are talking ethics versus business.

Again I think a lot of people are missing the point. I was talking about the word "fair" being tossed around.

Fair is about ethics. If you tie your price to a standard and you deviate from that standard then your ethics are no longer in play. Pure and Simple. Period.

Everyone moans when the Gas Companies raise their price because the spot price went up.

And everyone moans when the Pump prices do not come down when the spot prices come down.

Is it fair? No. Do the Gas Companies make tremendous profits ignoring their standard; the spot price?

Of course they do. Is it ethical? Not in the least.

Am I selling the lions share of my inventory at the current prices? No. Is it ethical? No. I have stepped outside of my pricing standard.

Is it "Fair" even and balanced? NO.

Is it good business from the perspective of my bottom line to hold back right now? Probably.

Again I am not talking about business practices.I am talking about ethics.

Ethical considerations include the possibility of loss. Business practices don't.

And let me flip that around Fred:

So the Customer should buy at a loss, just so YOU can sell at the new market price? When the spot price goes up. Excuse me if I consider your position a bit biased.

And before we get there, no one is holding a gun to either the buyer or sellers head,so lets not go there.