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  • Got your silver coins yet?

    Posted by Frugal on May 4th, 2006

    American Silver EagleSilver EagleSilver coins?  If you think I am a weird thirty-something high-tech professional, then I must be doing it right.

    For a long time from 2002 to 2005, I couldn’t find any good silver investment vehicle back in Asia where I’m originally from.  At that time, silver spot price was just below $5 an ounce.  Last summer of 2005, I finally found a good place to purchase at http://www.kitco.com/.  It was their perth mint silver certificate.  Since I was cost-conscious, I shopped around for the commission that I would be paying.  I later found just a handful of other places that sell perth mint.  The next thing was how much spread I would be paying between bid/ask.  It took a while to figure this out, but I finally got around my ways to calling Perth Mint Program in Australia.  Talking to the representative, I found out that the spread is more than 3%, which seemed to be too much for me.  One of the problem with investing in silver is that it is less liquid, and therefore has a bigger spread.  Furthermore, since the minimum of $10000 US seemed to me to be more than what I wanted to put into silver, I decided to call off my purchase when it was just $7.25.

    By the time when I finally found out about first-time special deals from online coin stores, the silver price has gone up to $10 in early 2006.  I didn’t want to put too much money in, since the spread and premium over spot silver is even higher.  At this point, I just wanted to have some small amount of silver to balance with my physical gold holding.  Since I have never seen any silver eagles, I bought from two online internet stores: http://www.preciousmetals.com/, and http://www.universalcoin.com/. This way, I can compare the silver coins that were sent to me from the two stores.  I paid almost $11 per coin, about some 10% premium over the silver spot price which however included some minting premium.

    When the postman delivered my package, he keeps asking, “what’s in this small package?  It’s kind of heavy for such a small package.”  I simply smiled, knowing that he probably would not understand why (or at least in such a short time).  Yup, I got total of eight rolls, 160 American Silver Eagles at home, paying no storage fee whatsoever.  And in less than 3 months, silver zoomed up to $15, but has recently corrected to about $12.  Me, not worried.  (Boy, before I get the chance to publish this, it went backup up to $14 again.)

    I can’t explain this feeling about silver coins to you unless you are also holding the coins.  For the first time in my life, I was holding these silver coins in my hands, feeling its weight and brilliance, and it’s just about $10 a piece.  Money used to be just a mathematical number in the bank or brokerage accounts to me.  But by holding these silver coins, I realized that it’s real stuffs, real money.  I would trade $10 paper bill for such a piece of coin ANYTIME.  Don’t give me the face from Alexander Hamilton.Ten dollar bill   Give me the Eagle.


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    14 Responses to “Got your silver coins yet?”

    1. frugal Says:

      I just had a lunch with my richest friend from college days yesterday. He told me to buy silver, and said that he bought a big load of silver coins. Since his networth is probably more than 10 times than mine, his purchase was in the unit of 500 coins. He also told me that Rich Dad Robert Kiyosaki is recommending precious metal investment.
      I’m actually worried by his investment and what Rich Dad says. I’m afraid that this is indicating an intermediate top forming very soon in precious metal market. However, if this PM market is in the phase 2 of the bull market, then the majority of the participants will become right. And obviously, it will begin with the smarter money from the participation of wealthier people. I myself don’t have particularly high opinion of Rich Dad. He is 4 years late to the PM market now, while the best of my information sources indicated the potential bottom even before it happened since 7 years ago. In any case, I will keep a close eye on all participants to judge how the bull market evolves from stage to stage.

    2. BlueDaze Says:

      Robert Kiyosaki is one big fraud…

      http://www.johntreed.com/Kiyosaki.html

      http://gewinnvortrag.blogspot.com/2006/05/slv-robert-kiyosaki-says-buy-silver.html

    3. frugal Says:

      Yes, thanks for the link. I have been wanting to find the link on his filing bankruptcy. His words are quite empty. However, he is a master of putting big words together, and sound seemingly true. My money manager just sided with me on what I have been worried about: mining equities not confirming the highs in physical markets. I think the intermediate high in physical market is any time now.

      However, I don’t agree with the second link. Yes, gold & silver are not really investments like companies making products. They are simply vehicles of preserving wealth. But a 20+ bear market in commodity has stopped, and turned into a strong bull marekt.

    4. BlueDaze Says:

      Hi,

      The 2nd link was more for the critique on Robert Kiyosaki (the person). It is also good to keep in perspective alternate views on the gold / silver bull.

      I am also vested in gold (GLD) and gold shares so the non-confirmation of the mining equities is indeed disconcerting. Perhaps this is the major correction of all asset classes that Marc Faber forecasted in “Anatomy of a Bear Market”.

    5. frugal Says:

      Yes, it’s healthy to have the alternate view, because they might just be right.
      I am not too sure how a major correction of all asset classes, described by the deflationists, can happen yet. I am certain that US Fed will choose heavy inflation over deflation, in which case, the commodity market will boom. On the other hand, I have never flatly rejected deflationists yet. There will be regular mini-crash or big correction along the way of the commodity bull. And many people have been predicting one coming.

    6. Anonymous Says:

      Helicopter Ben Bernanke will never allow a deflationary event to occur.

      My preferred alternative investment to gold is non-US companies with a history of increasing dividends. The compounding effect of dividend reinvestment is a wonderful thing.

    7. frugal Says:

      Yes, Helicopter Ben he is. I’m sure he is regretting big time for what he said in 2002.

    8. Novice Says:

      I would like to buy some silver coins. What discounts did you get as a first time buyer at those two stores and how would I get them? Thank.

    9. frugal Says:

      I’m not too sure if you can get those discounts since I received the promotion in my mail. I actually found a better place to buy them afterwards. But this store is local to where I live. They charge 70 cents premium over the spot at the close of the market, and that is a better price. I had a friend who bought from Monex, but I read a terrible comment on the internet on Monex once. My friend bought in a very large quantity and did not have any problems.
      If you can find a reliable and local place, that is usually the best. I found that internet pricing for silver coins may not be necessarily better. Send me an email if you need more info on the local place that I found. Definitely check out any stores on http://www.bbb.org. The two internet stores that I bought from actually had some complaints about their marketing practices. They may keep calling you for repeat business once a month or so. But so far I don’t have much problem with their calls. Their calls almost serve as a contrarian indicator, just another piece of information to the market puzzle.
      I tend not to invest direct in bullions because if you get cheated, you will lose quite a sum of money. I bought some silver coins for a potential economic doomsday which may never come. I just wanted to make sure that if my paper money is not good, I have at least a couple of months to half year of “money supply”. Obviously, silver coins are cheaper, and are easier to “break for changes” I believe. And if such day never comes, silver itself at least is a good investment so far.
      There are many other ways to invest in silver, but no other way is more reliable than a physical delivery, as long as you can ascertain that they are genuine. Silver eagles are a relatively safe way because it is illegal to countefeit silver eagles.

    10. frugal Says:

      Novice,
      ML has a very good article on buying coins. His site also offers very good advice in gold/silver investment. Definitely check out his article: http://investmiddleway.blogspot.com/2006/04/guide-to-investing-in-gold-and-silver.html

    11. Novice Says:

      Thank you for your response. I will buy a roll or more of silver eagles. From what I’ve read, people are saying there will be a bounce up in prices before another correction to about $10. I’ll buy rolls when that comes to pass. There seem to be rolls for substantial discounts on eBay, and I’m still trying to figure out if that would be a wise course to take.

    12. frugal Says:

      I will be really carefully with anything from Ebay. Silver eagles are like real money. They just can’t be too far from the spot price of silver. It’s impossible to get any coins below the spot price, unless they really want your repeat business, and the quantity is LIMITED. Otherwise, they can easily resell these silver eagles back to the market for more money than selling to you. If someone sell me $10 bill for just $8, I am going to run away, instead of buying a load of it.

    13. Novice Says:

      Well, I bought some rolls of eagles when silver went below $10. However, the premium over spot was steep, over $1.60, and that was pretty much the lowest I found with the stores from invest in the middle way and your two stores. Do you have any suggestions where else I can look so I’m not paying 17% over spot next week.

    14. frugal Says:

      Maybe try monex.com? But I think I said somewhere on my site that I read a horror story on the internet about this company.
      $1.60 is way TOO EXPENSIVE. If you live anywhere close to where I live, there is a VERY GOOD local store and they have two branches around here. They only charged $0.70 over spot but it has to be the closing price of that day. I’m not going to reveal where I live, so you will need to send me your zip code if you’re living in California to my email address, and then I can tell you whether it is close by to your place.
      I should probably buy some more silver coins. I was paying almost 10% over spot, and I just hate to “waste” money when I can get a cheaper price by buying SLV (except it’s still a paper instrument). I bought fewer coins than I would like only because I think the premium over spot was expensive.
      If I were you, I wouldn’t be paying 17% over spot. But hey, if I’m correct, towards the end of the bull market if it would go so crazy (I hope not, don’t want to see the world economy collapse), I’m sure that 17% premium over spot will be nothing. People at that time may pay you 30% or even 50% premium over spot, and just want to grab your coins or even rob your coins if possible. Unfortunately, at such time, you won’t be selling your coins either. If there is a hyperinflation like what happened in Germany, you can no longer put a price tag on silver coins. Tell me what’s 1 ounce of silver divided by zero of paper money:silver ratio. It’s infinity. There won’t be a price tag. All coins will disappear. Any coin holders will hold on to their silver like holding onto their dear life.
      Again, precious metal coins are the only “investment” that I never intended to sell or “profit” from it. I hope I will never profit from it. But just in case. Maybe I will need them to exchange food for my family. Let’s hope that such days never come.