posted on Feb, 24 2011 @ 08:30 PM
Today was the day I was waiting for, a nice size correction for silver. I didn't exactly back up the truck, nor did I succumb to temptations to buy
some options (maybe next big dip!), but I did load up on physical, replenished inventory that I had allowed to drift down, as the price went up this
Fortunately, I'm a regular at most coin shops in my area, so no one was surprised to see me, but there is something less experienced people may
encounter on a big down day.
You may call around, asking for whatever you are planning on getting, and find that many dealers will tell you that they are "out". Don't
immediately believe them! Sometimes it's true, but often, it's not. If they are smaller dealers, they probably carry less inventory, and whatever
they have in appreciable volume, they may literally have purchased from the public during the few days before you called. That being the case, if you
tell them you want "X" quantity after a $1.50/oz. drop, they may fib, and say to try back later. Sometimes they're smart, and they just raise
their prices accordingly, with a take it or leave it attitude.
Obviously, they want to make a profit, and in some areas, the margin can be tight, on particular products, such as silver rounds. Real example,
dealer buys a dollar back of spot, and sells for 50 cents to a dollar over (depending on who he is selling to, or volume involved, etc.). That $1.50
drop may not have completely erased his margin, but darn close. If you are a customer that gets the 50 cent-over special price, don't be surprised
if they don't want to sell at that price.
Larger dealers are interesting, some of them hedge of course (futures), but not as many as you might think, because depending upon how they are
reading the market, they may decide to dump everything they have assuming the next day will get worse. The problem here is that they can get on the
phone and move so-many thousand ounces instantly, by committing to deliver. In that case, when you call, they may be sitting on 10,000 rounds, but
they are "out", because they dumped the whole thing with one phone call.
Here's my advice for the newer investor in physical silver, in these crazy markets. Just SHOW UP, don't call ahead. Obviously, you need to keep
some powder dry, and watch the price, but when it drops, be ready, and have a few shops targeted already.
It's exactly what I did today. I was out getting a tire repaired (slow leak) when I glanced at my iPhone and the 35 cent decline turned into $1.60,
in mot many minutes. As soon as they got me back on the road, I hit three shops, and really cleaned up, as dealers were counting up inventory, and
considering their options (one small shop, the guy still didn't realize things had changed so fast, until he went to check the price, as I stood
"If" I had called a couple of these guys, they might have told me anything, but since I hung my head in their face, they tend to feel more obligated
to give you something. Also, it's hard to tell a person face-to-face that you're out, when the coin counter noise is echoing in the background!
Usually, they CAN accomodate at least some of your demand, so grab what you can get, and head on to the next place.
Silver price is back up 44 cents as I type. No guarantees about tomorrow, the decline could resume, and a further correction could temporarily make
my "success" not feel as sweet.
BUT, if tomorrow is lower, I still haven't shot my wad, not at all. I'll be back to see what else I can find. BUT, my expectations won't be as
high. I won't be too surprised if they tell me some guy (like me) was in the day before, and cleaned them out already. On Day Two of a big decline,
such a statement will ring truer and truer. And if I can find anything in volume worthwhile, I will be thankful, but I won't hold my breath.
Rather, I will congratulate myself on my previous day's gains, knowing that something $1.50 lower, is better than nothing $2.50 lower.
Such is the "real math" of this super tight physical market. Take it for what it's worth, and good luck to all.