New to bullion investing ...

Hi all. I've recently started investing in silver bullion and was hoping to get some advice from this group.

The bullion I'm focusing on is "junk" silver. I picked up 2 walking liberty half dollars today on ebay for $24.98 (that price includes shipping). The value of the silver in these two coins (based on the current price of $36.71 oz) is $26.56, so I feel like I did very well on these two coins (silver value is $13.28 per coin and with shipping fees I paid $12.49 per coin).

But, that's actually my question to this group. What is a "good" buy? Should I expect to be able to pick up "junk" silver at below current silver prices, at current prices, or at some premium?

Appreciate any input/advice you have for me!

Susan

 

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You made a good buy. My personal preference is for American Silver Eagles which cost a little more but also sell for more when you dispose of them and have some potential for future numismatic premiums. A lot of people will offer strong opinions on this over what amount to small differences. If silver doubles or triples or more from here, $1 differences on the buy side won't amount to much. If silver goes noplace or drops, it won't make much difference on the downside. So junk silver around spot or ASEs at a slight premium are reasonable prices to pay provided you realize that silver is one of the most volitile and risky investments you can made.

 

I just won two partial Wash Quarter (early sets) last week on eBay. Just got them in the mail yesterday & today.
My bids were just under spot last week. Plus I feel like the folder is worth $3 -$4. So I am satisfied with what some call junk silver.

 

It's just getting better and better for me with this eBay seller. Because he made an error in date availability on the walking liberty halves, he's sending me a 1 gram scorpion bar and not charging me shipping on the coins (that brings the cost down to $21.99 for the two walking liberties). He's also going to make me a deal on his remaining liberties. If I can pick those up for $11/ea., I'm going to gobble up what he has.

@Cloudsweeper, I appreciate your input, but I'm going to disagree with silver being a risky investment (and hope that I'm not jinxing myself by doing so!).

Volatile, yes. Risky I believe is only an issue if you're looking at it as a shorter term investment. I'm basing this on the trend of silver pricing over the past 10 years (http://www.infomine.com/chartsanddata/chartbuilder.aspx?g=127681). The dips we're realizing now are not close to the 50% dips that were realized in 2008 (when silver plummeted by 50%). And, even if we do have a 50% fallback, I view it as a buying opportunity. Ultimately, I feel silver will exceed $50 oz at some point in my lifetime.

With that said, I'm a firm believe in not putting all your eggs in to any one basket and my total silver investment will likely only amount to ~ 5% of my total portfolio.

 

Are there any good dates & higher grades of the Walking Liberties ?

 

You can believe what you wish, but this isn't something that is open to opinion. Every investment has something wrong with it, and if you can't identify the bad characteristics of silver, and can only see the good, then you are probably headed for problems unless you do more research. Good luck.

 

@McBlzr, no good dates (war years) and the grading is good. Really just melt value.

 

And what is bad about silver besides its symbiote, the fiat market? ;D That in and of itself is pretty substantial though.

 

If someone says they are new to investing in silver, and says they disagree that is is risky, they clearly haven't done enough research to be investing in silver.

 

Have you looked at charts of what silver did in the late 1970's, going from $4 or $5, to $48 I think, & then back to $5? There are still people around who bought PM near the top back then, & only in the last 3-4 years started to show a profit. I always think, in order to be a good investor, you have to have gone thru at least a couple of market cycles. If you're just going to buy whatever has already gone up the most, well, ask the people who bought real estate at the top.

There are some who claim "it's different this time", b/c now we have "deficit spending", & "fiat currency". It's funny, those were 2 of the reasons why PM prices went nuts in the late 1970's.....G&S were supposed to go up almost forever back then too....

 

I agree, it is risky. Most any investment is (even bonds nowadays), and silver is certainly one of the most volatile, but fundamentally I only see bullish factors. I was just interested if there were any bearish factors I am unaware of.

 

I would agree with volatile, and with the fact that silver is historically high. Risk? I am not so sure any PM is the riskiest. Risk is the chance of decline to me, its not volatility like it is measured historically in Finance. PM can never go to zero, so by default do not have the lower end risk as most financial instruments.

Is the price today relatively high? Yes. Is silver among the riskiest investment options? To me it depends on how you are investing. Buying calls or puts on any commodity? Yes, that is risky as all get out. Buying and holding a storable commodity? Not nearly as much, considering zero is not your bottom. The greatest aspect of PM is being able to easily store forever, an aspect missing in almost all other commodities. Then, factor this purchase in with the blend of your other investments, and that lowers your risk further, since PM will be in inverse relation to many other investment's performance.

In short, as part of a overall portfolio, and not too heavy in PM, even at today's prices I would not consider PM too risky. Silver is volatile, but physical possessed silver as part of a portfolio is muhc lower risk. I am still not saying its a good buy, just not that risky.

Chris

 

For my own portfolio, I define risk as the chance of permanent [or at least long term] capital loss. When someone says they are new to silver investment and do not consider it risky, I get concerned that they may not understand that silver is a commodity selling above the cost of production and therefore may fall and stay down for a very long time, and that a dip is not necessarily a buying opportunity. I'm not a big fan of the idea that something is okay to own because it can't go to zero or because it only takes up a small percentage of a portfolio. The only reason to hold any equity type investment is because the probability of gain greatly outweighs the probability of loss. I considered silver to be virtually risk-free when it was below $10 and I was buying. I still think it's a good holding and under certain circumstances yet to be determined, and might even be a great holding, but this is no slam-dunk sure thing anymore.

 

You used to list the cost of production at $20, and more recently $25. How long until energy costs and dwindling buying power push that higher (not to mention silver scarcity)? That was a rhetorical question. Just saying that while I agree with your concept about cost of production being a worthy baseline I think that cost will continue to rise, and even if things revert to that level it doesn't mean that the price at that point will be what it would be today. Inflation is picking up in China, and we have yet to see the full effects of monetary easing in the US. If not for Euro weakness and world reserve currency status our buying power today would not be nearly as strong as it is.

Last month the Basel BIS went against helicopter Ben's broken record policy and said interest rates need to be raised swiftly and significantly to stave off inflation which is bearish for PM's in the short to medium term, but as inflation picks up (and maybe more importantly as confidence is lost in fiat currency) that could very easily be overcome - assuming those things come to pass.

Currency is a unique thing in that you can potentially have capital gains while simultaneously losing wealth. As per Mike Maloney, pricing things such as real estate and stocks in relation to gold instead of currency over the last century shows some very bullish trends for precious metals as the current ratios are still very skewed compared to the historical mean, and the direction where things are headed is clear in those charts. I only wish I had seen them 10 years ago!

Personally I feel the risk in holding fiat currency is greater in the long run or I wouldn't be in metals to begin with, but you are right that there is no slam dunk in the Twilight Zone. Anyone who bases their financial security on the advice of strangers and not their own research is asking to get burned.

 

There was inflation every year from 1980 to 2000, and the price of silver didn't rise. I don't think it is a sure thing that it will rise from here either. The continuation of high energy prices seems certain, but new discoveries, replacement by natural gas, deflation and recession might change that too for mining. Wage levels can fall. A couple of large new silver discoveries can change things. People forget that enormous debt levels aren't always inflated away. Sometimes they are defaulted[deflated] away. And so on...

A lot can happen that would make silver prices lower a decade from now. People should at least know that and consider what they will do under those circumstances instead of considering $35 silver a sure thing. I still own silver and like silver, but I certainly don't consider the profit and loss potential any different than it is from certain common stocks that I like either. If you search back through some very old posts, you will probably run across a few by me stating that I though silver was virtually sure to rise back when it was in the $7-8 range, and some people disagreed. Now it is 5X higher, and earlier this year I actually sold some when it spiked up temporarily. If it goes back up and continues to trend up, I'll continue to gradually sell. I still think the probability of gain is greater than the probability of loss [otherwise I would bail out] but it's a closer call.

 

If you do not believe investing in silver is risky just look at the past. Those of us that were dealing in silver in the early 1980's learned then how risky silver and gold can be. When investing in anything buy when its low and sell when its high.

 

You are way ahead of the curve considering risk as only decline. Most financial people measure it as volatility. That is the definition of beta, and why I rail against it in my Finance classes I taught.

Good thoughts Cloud, we always agree 99% really of course. I would simply disagree with looking at all assets in a protfolio in isolation. In certain circumstances bonds and stocks shoul move down, and PM move up, and vice versa. Having an asset class that moves in opposite directions than other asset classes in a portfolio reduces the risk overall of the portfolio, enabling higher inclusion of riskier assets. This is what I was talking about. I certainly do not like silver at todays price in isolation, but I still like some PM exposure, (either physical or stock, never puts and calls), in a portfolio to overall reduce risk.

I am like you, and bought my silver when I thought it was riskless, (1990's at $4 or less). However, I am just saying at 'riskier" price levels some PM exposure can still contribute positively to an overall portfolio.

Chris

P.S. As a bonus, if Susan starts collecting junk silver as part of a coin collection, then there is return there from the enjoyment that further reduces her "risk". Having fun is worth a lot to me!

 

I'm not a big believer in anything approaching "normal" portfolio management, so that should be taken into consideration when reading anything I write. My basic approach is to hold cash unless I find some asset or asset class where I think the probability of gain greatly exceeds the probability of loss. And I cap those investments at a lower percentage of the total portfolio than most professionals advocate, so the risk of each individual asset is not a big deal. I abandoned traditional asset allocation [e.g., 60% stocks, 40% bonds or whatever] a very long time ago. Right now my equity holdings are about 40% PMs and 40% energy, so diversification isn't really something I practice.

 

Fair enough, though I think looking at what you hold does have to be taken into cosideration, at least to me. I don't want to hold all of my assets that are all vulnerable to the same likely scenario depressing all of their values, like holding all commodities or all IP US holdings.

Asset allocation percentages are so huge you could drive a truck through them. I find them only "useful" in talking to someone without any financial education at all. After you understand some basics, they are just all salesman talk, like a lot of finance.

 

Holding concentrated positions isn't as risky as it may sound. I'm always selling a little on the way up and buying a little on the way down, so fluctuations tend to be more useful than harmful over the years. When oil prices rose to $147 I was selling on the way up, and when it subsequently fell back to $40 I was able to put a lot of it back in. This isn't as perfect as correctly calling tops and bottoms, but it takes a lot of the risk away. When silver eventually reaches its peak, I know I'll be selling, but when it collapses again, I'll probably still own some. I try to make the buying and selling as mechanical as possible. It's just what works for me.