ASE sales collapse.. Are *you* still stacking?

[Paul]

• "Buy When There's Blood in the Streets"

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that: "The time to buy is when there's blood in the streets."

He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that's not the whole story. The original quote is believed to be: "Buy when there's blood in the streets, even if the blood is your own."

This is contrarian investing at its heart – the strongly-held belief that the worse things seem in the market, the better the opportunities are for profit.

Most people only want winners in their portfolios, but as Warren Buffett warned "You pay a very high price in the stock market for a cheery consensus." In other words, if everyone agrees with your investment decision, then it's probably not a good one.

Going Against the Crowd
Contrarians, as the name implies, try to do the opposite of the crowd. They get excited when an otherwise good company has a sharp, but undeserved drop in share price . They swim against the current, and assume the market is usually wrong at both its extreme lows and highs. The more prices swing, the more misguided they believe the rest of the market to be.

Bad Times Make for Good Buys
Contrarian investors have historically made their best investments during times of market turmoil. In the crash of 1987, the Dow dropped 22% in one day in the U.S. In the 1973-74 bear market, the market lost 45% in about 22 months. The September 11, 2001, attacks also resulted in a market drop. The list goes on and on, but those are times when contrarians found their best investments.

The 1973-74 bear market gave Warren Buffett the opportunity to purchase a stake in the Washington Post Company (NYSE:WPO) – an investment that has subsequently increased by more than 100-times the purchase price – that's before dividends are included. At the time, Buffett said he was buying shares in the company at a deep discount, as evidenced by the fact that the company could have "… sold the (Post's) assets to any one of 10 buyers for not less than $400 million, probably appreciably more." Meanwhile, the Washington Post Company had only an $80 million market cap at the time.

After the September 11 terrorist attacks, the world stopped flying for awhile. Suppose that at this time, you had made an investment in Boeing (NYSE:BA), one of the world's largest builders of commercial aircraft. Boeing's stock didn't bottom until about a year after September 11, but from there, it rose more than four-times in value over the next five years. Clearly, although September 11th soured market sentiment about the airline industry for quite some time, those who did their research and were willing to bet that Boeing would survive were well rewarded.

Also during that time, Marty Whitman, manager of the Third Avenue Value Fund, purchased bonds of K-Mart both before and after it filed for bankruptcy protection in 2002. He only paid about 20 cents on the dollar for the bonds. Even though for awhile it looked like the company would shut its doors for good, Whitman was vindicated when the company emerged from bankruptcy and his bonds were exchanged for stock in the new K-Mart. The shares jumped much higher in the years following the reorganization before being taken over by Sears (Nasdaq:SHLD), with a nice profit for Whitman. Thanks to moves like this, the Third Avenue Value Fund has earned a market-beating 14.3% return since Whitman founded the fund in 1990.

Sir John Templeton ran the Templeton Growth Fund from 1954 to 1992, when he sold it. Each $10,000 invested in the fund's Class A shares in 1954 would have grown to $2 million by 1992, with dividends reinvested, or an annualized return of about 14.5%. Templeton pioneered international investing. He was also a serious contrarian investor, buying into countries and companies when, according to his principle, they hit the "point of maximum pessimism." As an example of this strategy, Templeton bought shares of every public European company at the outset of World War II in 1939, including many that were in bankruptcy. He did this with borrowed money to boot. After four years, he sold the shares for a very large profit.

Putting It On the Line
But there are risks to contrarian investing. While the most famous contrarian investors put big money on the line, swam against the current of common opinion and came out on top, they also did some serious research to ensure that the crowd was indeed wrong. So, when a stock takes a nosedive, this doesn't prompt a contrarian investor to put in an immediate buy order, but to find out what has driven the stock down, and whether the drop in price is justified.

The Bottom Line
While each of these successful contrarian investors has his own strategy for valuing potential investments, they all have the one strategy in common – they let the market bring the deals to them, rather than chasing after them.

[vand]

I wish making money by being a contrarian was that easy, but the truth is that is is anything but.

Buying when something crashes in price is easy. It's having patience to sit on what you've bought, possibly for years (and perhaps watching it fall even further!) with the same conviction as when you brought it... ignoring your break-even point when it finally claws its way back and then sitting and doing nothing rather than being impatience and taking the merest hint of a profit.. THAT is what is difficult.

 

[KDave]

It is indeed difficult to let your winners run, but taking profits is never a bad thing to do when you hit a target in my opinion. It's far too easy to convince yourself, that something has further to run only to see it fall. Keeping emotion out and being non biased when you have skin in the game is tough. 

I have had shares that I sold at a decent profit only to watch them double or even triple. I have also had investments I sold for profit, then watched them fall dramatically. Neither of these scenarios I saw coming when I sold, yet the profits I took were real, so it didn't matter that my timing was right or not. The only time that matters is when ego gets involved and I've never known of ego being part of a good investment strategy. 

[tbone]

12 hours ago, sixgun said:

If silver went to £100/oz how would one buy a loaf of bread and a carton of milk from the local shop? Clip a bit of silver off a Freedom Girl medallion? This won't work. If the people don't create something for themselves the powers that should not be will present us with something worse than we have now. 

I personally don't think we'll ever get close to a Mad Max total collapse situation where we need to use silver coins to buy bread.  But if we did find ourselves in that situation, I would much rather have some mercury dimes than bitcoin.  As for the powers that be giving us their solution, my guess is that their one-world currency solution will involve the blockchain and some crypto (maybe bitcoin).  Some would even say bitcoin is a beta test for a one world currency.

[Jester]

18 hours ago, sixgun said:

i am a gold and silver bug as most of us must be to be here at all. At one point i imagined we would use gold and silver as a means of exchange. We might use them to a limited extent when the fiat currency system collapses but is this method going to be practical? If silver went to £100/oz how would one buy a loaf of bread and a carton of milk from the local shop? Clip a bit of silver off a Freedom Girl medallion? This won't work. If the people don't create something for themselves the powers that should not be will present us with something worse than we have now. 

I must admit, when I first got into PMs it was to stack Silver for the day when the fiat currency system collapses and we're back to bartering.  Sixgun makes a great point about the viability of using Gold/Silver when trying to acquire the day-to-day items we need to sustain ourselves.  I had a similar thought that led me to buy fractional Silver for a short period of time...smaller weights/denominations might help me buy that loaf of bread and milk without trying to butcher a 1 oz Silver coin.  Well, I thought that was a grand idea until I noticed the higher premiums you pay on the fractionals!

I've evolved into more of a numismatic collector since then and have grown to strongly dislike Silver (if I never see another spot or patch of milky haze, I wouldn't shed a tear).  But if you'll permit me to wander into tin foil hat territory for a moment, there are some stackers/collectors/preppers all gearing up for this day of days that's yet to come and should it come, no one knows exactly what it'll look like.  One of my favorites (because it's entertaining, not because I think it's imminent) is an EMP attack.  For an interesting read on what an EMP attack may look like, I attached an article from the Heritage Foundation below.

http://www.heritage.org/homeland-security/report/electromagnetic-pulse-emp-attack-preventable-homeland-security-catastrophe

Wouldn't an EMP attack pretty much wipe out cryptocurrency records all together?  Would it be an instant collapse of that system and crypto investors would be left with nothing?  I'd rather be in my shed sawing away on a 1 oz Silver coin at that point   For full disclosure, I know virtually nothing about cryptos and offer the question up from a position of ignorance.  Great discussion...really enjoying this thread.

[SilverSheriff]

11 hours ago, Jester said:

http://www.heritage.org/homeland-security/report/electromagnetic-pulse-emp-attack-preventable-homeland-security-catastrophe

Wouldn't an EMP attack pretty much wipe out cryptocurrency records all together?  Would it be an instant collapse of that system and crypto investors would be left with nothing?  I'd rather be in my shed sawing away on a 1 oz Silver coin at that point   For full disclosure, I know virtually nothing about cryptos and offer the question up from a position of ignorance.  Great discussion...really enjoying this thread.

Hi Jester, just like you I am not an invester or owner of any crypto currenices

However I thought the basic premise of cryptos was that it was a decentralised ledger of account, installed and shared by its users (allover the world) and updated with every new transaction. Like a paper notepad writing down each new transaction and sharing it simultaneously will all its users to be verified before any new transaction can take place, this prevents fraud, debasement and manipulation... Unlike if one person i.e a central bank had control over the money supply.

Looking from the outside it appears that the large demand for crpytos is from China citizens, and I'm sure the Chinese government will have some concerns about that and potential capital flight that may unfold

[vand]

I am not worried at all about divisibility.

Let's be honest, if it ever got to that SHTF scenario where 1oz was difficult for the average person to afford then it would be a very nice problem for us stackers to have. 

If and when there is a large rush for physical, I expect that liquidity will be much better than it has ever been, for that is the nature of market tops - as public interest grows there will be new mechanisms for buying and selling to draw the masses in. 

[sixgun]

50 minutes ago, vand said:

I am not worried at all about divisibility.

Let's be honest, if it ever got to that SHTF scenario where 1oz was difficult for the average person to afford then it would be a very nice problem for us stackers to have. 

If and when there is a large rush for physical, I expect that liquidity will be much better than it has ever been, for that is the nature of market tops - as public interest grows there will be new mechanisms for buying and selling to draw the masses in. 

 

In a SHTF scenario what would you swap your silver coins and bars for? Paper currency is worthless. We are back to barter.

A pint of milk is £500 and your ounce of silver is worth £23 000. Now what? You need a means of exchange. Cryptocurrency looks attractive. 

1000oz +/- silver in the stack - swap out 1oz for 0.25 BTC, Litecoin or whatever and then spend that.

[vand]

13 minutes ago, sixgun said:

In a SHTF scenario what would you swap your silver coins and bars for? Paper currency is worthless. We are back to barter.

A pint of milk is £500 and your ounce of silver is worth £23 000. Now what? You need a means of exchange. Cryptocurrency looks attractive. 

1000oz +/- silver in the stack - swap out 1oz for 0.25 BTC, Litecoin or whatever and then spend that.

 

It doesn't even need to be a SHTF scenario. 

I have always held the position that will be a prudent time to swap out of PMs and into other asset classes and that doesn't need to be when we are eating rats in the street, but rather when PMs are overvalued in comparison to other asset classes. It would have to be a low single-digit Dow/Gold ratio, or low House price/gold ratio to pique my interest.  At the moment we have exactly the reverse scenario - PMs are significantly undervalued compared to other assets.

I would probably still hold 10-15% of my PMs, not just for Doomsday scenario, but because it is never good to have absolutely all of your eggs in one basket or another which can be shown with standard portfolio allocation models.

[Guest]

Guys, your silver is worthless. I'll come and buy it from you for £1 an ounce! 

[sixgun]

Looks like there is going to be an announcement on the 250 tonne gold buy Maguire mentioned. i have not heard an exact date yet.

https://twitter.com/andrewmaguire1?ref_src=twsrc^google|twcamp^serp|twgr^author

 

[Gav]

I wish making money by being a contrarian was that easy, but the truth is that is is anything but.
Buying when something crashes in price is easy. It's having patience to sit on what you've bought, possibly for years (and perhaps watching it fall even further!) with the same conviction as when you brought it... ignoring your break-even point when it finally claws its way back and then sitting and doing nothing rather than being impatience and taking the merest hint of a profit.. THAT is what is difficult.
 

It depend on the person. If you are a person investing in something that you believe in then maybe that is the case.

I prefer not to invest with my heart and the hard part is doing the research and double checking facts, numbers and data. Again nothing always turns out as predicted and then you need to cut your losses and cutting them hurts.

[tbone]

8 hours ago, shortstack68 said:

Lets hope the internet doesn't go tits up if we need bitcoin as a method of bartering

Yup.  Apparently bitcoin and the new "bullioncoin" are so simple even a dummy like me can adopt it (and trust it!):

Bullioncoin:

 

Gold/silver:

 

[sixgun]

i pretty much fully understand BullionCoin but i must admit the flowchart is not helpful. 

Maguire tweeted that BullionCoin is launched next week. 

One BullionCoin gold is title of ownership of 1g of gold in the Allocated Bullion Exchange vaults. One BullionCoin silver is title of ownership of 50g of silver.

To create BullionCoin you buy gold or silver on the Allocated Bullion Exchange - you have an e-wallet and your block chain titles of ownership [BullionCoins] are deposited in the wallet.

You must buy in lots of 100g gold or 5kg silver to have BullionCoin titles of ownership created. One 100g gold bar is 100 BullionCoins gold. Five x 1kg silver bars is 100 BullionCoins silver.  As creator of the BullionCoins this is recorded in the title and this fact will remain however often the coins are sold and irrespective of who owns them.

You can then sell the BullionCoins you created through ABX into the secondary market. When you sell your coins you sell the gold or silver as you are selling title of ownership but you remain the creator of the BullionCoins.

The BullionCoins will trade on the German Stock Exchange and are denominated in USD. BullionCoins will be priced based on the price of gold or silver with a premium dependant on the market. BullionCoins are extinguished when they are used to redeem the actual physical out of the ABX vaults. This might be a day after you sell the coins you created or never at all.  You can use the cash you get back from selling the BullionCoins you created to buy more bullion on the ABX and so create more BullionCoins. You can keep looping this round and round, creating more and more BullionCoins and then every time these coins change hands in the aftermarket you get a small royalty. The BullionCoins are fully backed by gold or silver. I presume the ABX will keep a record of who owns any particular BullionCoins as part of the change of title of ownership as the coins are bought and sold. For me the bonus is the royalty income which depending on how many BullionCoins you create could be substantial.

[Gav]

One BullionCoin gold is title of ownership of 1g of gold in the Allocated Bullion Exchange vaults. One BullionCoin silver is title of ownership of 50g of silver.

This ratio will cause this coin to fail. The internal peg of 1 to 50 isn't sustainable. Just that will cause the coin to crash.

I would stay away from it.

[sixgun]

12 minutes ago, Gav said:

This ratio will cause this coin to fail. The internal peg of 1 to 50 isn't sustainable. Just that will cause the coin to crash.

I would stay away from it.

There are two different BullionCoins. Bullion Coin Gold and Bullion Coin Silver.  The coins are title of ownership of specific amounts of metal. They are not linked. You own a BullionCoin gold and this is title to 1g of gold in the ABX vault. It is not claim of any silver and vice versa.

[Gav]

There are two different BullionCoins. Bullion Coin Gold and Bullion Coin Silver.  The coins are title of ownership of specific amounts of metal. They are not linked. You own a BullionCoin gold and this is title to 1g of gold in the ABX vault. It is not claim of any silver and vice versa.

Oooh, I got that wrong. I thought that you could swap one for the other at a rations 1 to 50.

Though how would this be viewed by the SEC?

[sixgun]

i am definitely going to do 100g gold. i have the gold on the ABX waiting. This will be a trial run.

[tbone]

4 hours ago, sixgun said:

i pretty much fully understand BullionCoin but i must admit the flowchart is not helpful. 

Maguire tweeted that BullionCoin is launched next week. 

One BullionCoin gold is title of ownership of 1g of gold in the Allocated Bullion Exchange vaults. One BullionCoin silver is title of ownership of 50g of silver.

To create BullionCoin you buy gold or silver on the Allocated Bullion Exchange - you have an e-wallet and your block chain titles of ownership [BullionCoins] are deposited in the wallet.

You must buy in lots of 100g gold or 5kg silver to have BullionCoin titles of ownership created. One 100g gold bar is 100 BullionCoins gold. Five x 1kg silver bars is 100 BullionCoins silver.  As creator of the BullionCoins this is recorded in the title and this fact will remain however often the coins are sold and irrespective of who owns them.

You can then sell the BullionCoins you created through ABX into the secondary market. When you sell your coins you sell the gold or silver as you are selling title of ownership but you remain the creator of the BullionCoins.

The BullionCoins will trade on the German Stock Exchange and are denominated in USD. BullionCoins will be priced based on the price of gold or silver with a premium dependant on the market. BullionCoins are extinguished when they are used to redeem the actual physical out of the ABX vaults. This might be a day after you sell the coins you created or never at all.  You can use the cash you get back from selling the BullionCoins you created to buy more bullion on the ABX and so create more BullionCoins. You can keep looping this round and round, creating more and more BullionCoins and then every time these coins change hands in the aftermarket you get a small royalty. The BullionCoins are fully backed by gold or silver. I presume the ABX will keep a record of who owns any particular BullionCoins as part of the change of title of ownership as the coins are bought and sold. For me the bonus is the royalty income which depending on how many BullionCoins you create could be substantial.

Thanks for the explanation @sixgun .  I admit I'm not getting all the nuances here.   So if I buy 100g of gold on this exchange (with bitcoin?  cash?), then a 100g gold bar is purchased from somewhere and placed into some vault I presume (if so, is this audited somehow?  I also assume its 1-1 and not fractional).  This cost is based on the current spot (Comex/LBMA) price?  So then I sell these 100 gold bullioncoins to someone else via some exchange, and I get cash (dollars?) and release any rights to the physical, but get royalties every time someone else uses this coin? (meaning they sell it to someone else?  Purchase something with it?).  This royalty stops once someone down the line decides to redeem the physical I assume.  And that cash you get from selling you can use to buy more?   How do ensure when you buy more you are the creator of additional bullioncoins (and therefore get royalties later) and not buying someone else's created bullioncoins on secondary market? (no royalties?) 

I'm also curious on the rules and fees on an average guy wanting to take physical delivery of a small amt, say 100g of gold.  Can they ever settle up in dollars or bitcoin instead?  Just wondering how this will be different than the games they currently play on Comex or similar existing exchanges.  I'm also wondering how they plan to control a run on physical in any type of panic or big market fluctuations (I assume the idea is that the royalties will keep most from wanting the physical delivery?)

Anyway, curious your thoughts.  Thanks!

 

[sixgun]

1 hour ago, tbone said:

Thanks for the explanation @sixgun .  I admit I'm not getting all the nuances here.   So if I buy 100g of gold on this exchange (with bitcoin?  cash?), then a 100g gold bar is purchased from somewhere and placed into some vault I presume (if so, is this audited somehow?  I also assume its 1-1 and not fractional).  This cost is based on the current spot (Comex/LBMA) price?  So then I sell these 100 gold bullioncoins to someone else via some exchange, and I get cash (dollars?) and release any rights to the physical, but get royalties every time someone else uses this coin? (meaning they sell it to someone else?  Purchase something with it?).  This royalty stops once someone down the line decides to redeem the physical I assume.  And that cash you get from selling you can use to buy more?   How do ensure when you buy more you are the creator of additional bullioncoins (and therefore get royalties later) and not buying someone else's created bullioncoins on secondary market? (no royalties?) 

I'm also curious on the rules and fees on an average guy wanting to take physical delivery of a small amt, say 100g of gold.  Can they ever settle up in dollars or bitcoin instead?  Just wondering how this will be different than the games they currently play on Comex or similar existing exchanges.  I'm also wondering how they plan to control a run on physical in any type of panic or big market fluctuations (I assume the idea is that the royalties will keep most from wanting the physical delivery?)

Anyway, curious your thoughts.  Thanks!

 

i am looking at this from the perspective of a BullionCoin 'miner'. i will be creating BullionCoins on the ABX. This is the primary market. By buying metal on the ABX you will be creating BullionCoins in your name. i will buy gold and silver through the ABX, create BullionCoin titles of ownership and then sell them. I will be the creator and the royality will be mine. You will buy pre-existing BullionCoins by buying coins on the German Stock Exchange. The USD returning to me from a sale of BullionCoins will be used to buy more metal, create more BullionCoins and these will then be sold. If this works out i plan to create 10's if not 100's of thousands of BullionCoins. i hope to get a huge pension income from this. If i don't well i will have tried.

To be a BullionCoin 'miner', first you need to join the ABX. As an individual, technically you trade through someone else. i guess it is like buying shares through a broker who gets them off the market maker. You can choose from a list of companies that are members of the ABX. i automatically got sent to Andrew Maguire's company. This was fine with me and i would have chosen him anyway. 

As i remember i had to provide ID and address ID. You then get access to metaldesk which is the trading platform which accesses the ABX. There are several hubs where metal is vaulted and traded. To sell metal the metal must be in the vaults. There are two options. You can trade in USD or AUD. The money is deposited in a client account in Australia. These are different depending on whether it is USD or AUD. i would not advise AUD as you only can buy gold and silver through the Australian hubs which do not have the best prices. If you deposit USD you can trade through Dubai, Singapour, London, New York, Zurich. The best gold prices are usually through Dubai and the best silver is New York. 

I sent the money over for a number of accounts, i found using a currency exchange company gave me the best prices but not all of them will send USD to Australia. CurrencyFair is the best i found. It will send USD to Australia. i may use my Interactive Brokers account to exchange and send currency in future and will be able to exchange currency at the FX market rates but for now i used CurrencyFair.

You can then place market or limit orders for metal. i bought 100g bars of gold. They currently sit in the accounts. When BullionCoin kicks off, or a bit before, the BullionCoins will be created. They will be sold into the secondary market or not if you prefer. The USD will come back, even if you bought metal with AUD, the cash comes back as USD. Then you can buy more gold, create more BullionCoins and sell this. Round and round, creating more and more BullionCoins. The ABX vaults could suck in 1000's of tonnes of gold and individuals created huge numbers of BullionCoins on which they get a royalty.

BullionCoins are fully backed. If you own 100 BullionCoins you own 100g of gold. You have title of ownership over 100g gold. This is the strength of the coin. You will be able to use it as money and those taking it will know they are being paid in gold [or silver]. 

The royalty is only for the miners [creators]. You will only start to get a royalty when you sell the coins into the market. When you sell the coins, you sell your gold. The buyers of the coins have the option of using their blockchain title of ownership [BullionCoins] to redeem the gold from the ABX vaults. What would stop them is the premium of the coins over the spot price. I have put it to the Maguire team that the authorities could step in, buy coins and then redeem them and so spoil the party for BullionCoin creators. They don't think this will happen but i think it could happen. No big deal, i expect some of the BullionCoins i create will be redeemed but  i will be too busy making more to bother. 

If you have 100 BullionCoin gold, you own 100g of gold on the ABX. You will be able to sell the gold on the ABX for USD and withdraw the cash. Alternatively, you can arrange delivery of the gold. i have never taken delivery so would have to research the details but this is certainly possible. 

The COMEX is a futures market. Paper contracts, promises to buy or sell gold at a specific price and take/make delivery on a date. If you sell 1 GC contract you do not need 100oz of gold. When the massive numbers of GC and SI contracts are sold into the market, crushing the price, the sellers will not have the gold or silver. When multiples of annual world production have been sold in minutes, there never was especially the silver in existence to sell. When gold or silver is sold on the ABX the gold or silver must be in the vaults. When you will own BullionCoin gold or silver you will know the metal is in the ABX vaults. Traders will be able to trade coins knowing they are 100% backed. They are trading title of ownership. Not even on the spot markets can you know the metal actually exists. There can be no games. The idea is the price of gold and silver will be driven by the price of physical and not Monopoly board gold and silver.

[vand]

On 01/08/2017 at 17:17, Gav said:

It depend on the person. If you are a person investing in something that you believe in then maybe that is the case.

I prefer not to invest with my heart and the hard part is doing the research and double checking facts, numbers and data. Again nothing always turns out as predicted and then you need to cut your losses and cutting them hurts.

Well, everyone who invests does so in a vehicle that they personally believe in.. why on earth would you invest in something that you don't believe in?

 

[Gav]

Well, everyone who invests does so in a vehicle that they personally believe in.. why on earth would you invest in something that you don't believe in?  

 

Good point Sir, but what I meant was that I invest in things that have a basis of facts that are calculated and that is what is required for any investment.

 

Investing in silver or gold and going in blind just because I believe that gold and silver are going up, can cause unfortunately losses. If I don't calculate all my options before investing when the hidden costs can sink a person without them even knowing.

 

I think investing in PM takes skills and calculated decisions that need the proper research to make good investments.

 

I come here to learn from all you guys who have much more experience in the PM world. I don't mean to think I know more than you, I just have a different perspective on investing.