Bullion crazy = financial problems?

This is such a common thing I'm finding among people who buy coins/bullion. There are obviously people like many of us who live our lives responsibly and live within our means.

There are also many that I'm finding who get obsessed, buy tons and have little to no savings in cash. This always baffles me. At the first sign of trouble they're dying to liquidate and in doing so lose lots of money.

I just never understand how people can live so careless. I also blame many of our country's problems on people living carelessly with their finances.

Thoughts? Do any of you know anyone like this or met people like this?

 

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A thought. It's classic. It's the classic warning to PM bugs that those who have seen it before warn them about when the market is bullish and everyone's buying at high spot prices.

This is the nature of the beast and it always catches some off guard. Life and timing are part of the investment too, no matter how much you plan for it you can never expect to be totally protected from the unknowns.

Stackers like to think that when they need to use/sell their bullion it will be at some future point in time when crisis is everywhere affecting others around them, but that they'll be buffered by their bullion and afforded options other don't have. That is the risk in believing a future in their favor, where somehow the problems others are dealing with don't affect them. But when PMs are down in the market and perhaps trading for less than over zealous buyers bought it for in the first place, bullion is a burden. For those in a crunch like this, any problem in life that demands they liquidate bullion comes at the worst possible time for their investment, and that's a stressful time when life is not in their favor and they know they are loosing money by selling, even if they can see to a time beyond the immediate financial demand for accessing cash they have tied up in metals.

Dealers selling during bull markets make their money as prices rise when the headlines sew panic in buyers to react, and the same dealers buy it back at a fraction of the cost on the way down when similarly people flee the investment or have life force their hand. One simply can't beat time in this investment, just like no one knows when is the best time to buy or sell. The best many can do is try to stay reasonably balanced in cash, physical and other asset types, and carry no debt, so you can ride through the long periods when prices are not in favor, or stagnate. And so you can buy when others must sell and get PMs at the lowest possible price. For some these things come as a hard lesson, but far more refuse the lesson and the cycle repeats.

 

I'm not as loquacious as Krispy, but I agree...there's a lot of truth in what you both say.

 

And it's not just bullion. I've seen people go "all in" on real estate, "all in" with stock in one company, and "all in" with their own business.

 

The most damaging "all-in" investment we've all seen are the millions who go "all-in" on their houses and put themselves in a position where one false move equals financial ruin because they are so house poor.

I'd say that gamble is far more commom and damaging than PM's, yet is somehow more socially acceptable.

 

Even for the responsible it can be hard when bit by the silver bug for people new to it.

I max out my 401k but never focused on metals. I saw a story about roll hunting and then did research on silver and never realized its story. I know I need to get physical assets. I have a plan over time but seeing low prices may mean dollar cost averaging into it quicker. Make a purchase while spot is between the resistance and support levels. If it breaks through the support level then another purchase.

 

Far too many people are looking for a simple road to wealth. Be it real estate, stocks, or PMs, some latch on to the asset and go all in, to the detriment of their financial health. What these people don't realize, however, is that for most of us, the only true path to wealth is discipline, time, and the compounding nature of interest.

 

Yea I've becomes obsessed. Just started buying silver 2 weeks ago and I've already spent over $2000.
I'm going to stop and take it slowly.

 

I have also been going for a short time.

What caused you to suddenly start.

 

For these 2 reason:

1. I just wanted to buy and collect something that I can save for the future.

2. Bored and just needed another fun hobby.
My other hobby was buying and selling sports trading cards on ebay and various website. I'm taking a break from that at the moment.

 

Sports memorabilia has definitely taken a hit recently. Prices have plummeted

 

My only advice with bullion is to buy it with descrectionary income. After the 401k, the household bills, and savings I am left with about 20% of my paycheck for whatever I choose: bullion, coins, golf, casino, going to Hooters, ect. Maybe the bullion will be profitable, maybe not. But at least other needs were not compromised by buying it.

 

I'm not sure I follow the logic. The savings rate in the US is not very stellar. Isn't it something like less than 25% of Americans have 6 months or more worth of monthly expenses socked away in savings. Yes stackers have placed all their savings in one basket but their PM hoards for the most part are accumilated without the use of leverage. In fact the majority of stackers I have encountered tend to exhibit mizer tendencies. Makes me believe most fall in the less than 25% group.

 

That's true...and good. However, the OP was making the observation (and I think a good one) that Stackers can sometimes over do it...tying up too much of their savings in PMs.

The net result being that they buy when the economy is good (when they have money, but PMs are expensive), then they're forced to sell (raise cash) when the economy is sour and PMs are cheap.

Not true for every Stacker, but certainly true for some.

 

I agree, but think the main point was the point of it being overdone. I am a stacker, (though some here might swear I am not), but I do not ONLY buy pm as an asset. Some people ONLY have pm as their asset, and its a very fair and cogent point that you can be right long term and still get crushed if you need to liquidate at a bad time.

But, to your point JAF, I believe its fair as well. Most PM stackers I have ever met are good, hard working folks who understand personal finance better thna most. I simply believe they were sold a bill of goods about how pm will "go to the moon" and overdid it at higher prices. Us longtime pm buyers were wrong, and "it was different this time", right? Not trying to pat myself on the back, but trying to teach a lesson to others reading this. Right here on CT it was discussed how it "IS different this time". Any time I ever read those words, they are the scariest words in Finance possible, because its almost never true. Every bubble uses this EXACT SAME PHRASE. If you ever read this people, please hold onto your wallets and run, because it is almost always the last gasp of a bull run about to turn into a bear.

 

Why do they have to be sold a bill of goods? They can't read, decipher information and come to a conclusion that is different than yours? Am I reading your post that you happen to be the only stacker that has his head on straight?

 

So you are saying people buying silver at $40 was a good thing then? I am referring to those writers and sellers of PM talking up how the market was going to pop, and go to $100 soon.

Are you saying either this didn't happen, or it still may so buying silver at $40 was a wise investment? Which one?

I never worry about someone coming to a different conclusion than myself. I am only objecting to the salesmanship, since most of those people bragging about buying silver at $40 were all using the same rational, a rational carefully crafted and spoon fed to them by the pm pusher industry. Was it still their fault for believing "it is different this time"? Yeah, it is, but I can still dislike those profiting from them.

 

If there is one thing that is inevitable, it's that people will buy in and sell out at the wrong time more often than not.

I honestly don't care one bit for the "pushers" as you like to call them, but in the end it's up to the person reading to decipher the information and message and why it's being written. I really dislike it when people are not responsible for their decisions. You live with and suffer the consequences of making bad decisions, and nobody made those decisions for them, so why not blame themselves.

FTR, I bought from $12 all the way up to $40 and all the way back down to $18.xx it was last week. I've also sold all the way from $22 all the way up to $40 and most of the way back down. Does that make me wrong, or dumb, or bad at making decisions for myself? Does me doing that to drive down the cost of the PMs I hold as a "stack" or savings account make me stupid for buying and selling at the top?

I guess I don't get your perspective of what a "stacker" is? It's not all buy, accumulate and hope. I'm sure there are plenty that do that, but for sure not all, and your posts seem to assume that as a reality, and it's probably not...

 

Well, here is an example of why I think the the bullion bloggers and such lead the PM Bulls down a wrong path. Let's look at Sprott. As you know, Sprott INC. manages various investment vehicles and hedge funds that are based almost entirely in PM's. As you can imagine, essentially all of his funds have gotten clobbered this year to the tune of around 30% of more. His company has got some major problems now as he is selling PM to raise capital, etc. etc. as you would expect as folks are running to door.

Sprott also shoved the PM philosophy to anyone who could read or listen. We all know the banter. In addition, he had price target of $100 on Silver. Another of Sprott's "beliefs" was he was against diversification, he has stated so many times.

So if we were to take Sprott's word at face value, you would have to believe his personnel portfolio would contain, mostly PM's in one form or the other. I mean he preaches their benefits, thinks silver was going to $100 and does not like diversification. That would be the only logical conclusion, right?

So now lets look at his personal wealth. You would think he took a whooopin' like the vast majority of stackers, but Forbes has reported that Mr. Sprott has actually increased his net worth by $150 million dollars in 2013. That is almost a 15% increase and his fortune now stands at 1.3 Billion dollars. How can that be? My only conclusion is Eric Sprott was holding a buttload of equities, not PM's. You can draw your own conclusions.

 

Yes, but even at half value my gut feeling is the majority of the so called stacked savings as described in the OP's original post is still greater than 75% of the US households.