Time to sell physical in hopes of rebuying later at a discount?

My LCS buddy told me this might be a good time to "liquidate" about 20 - 30% of my holdings because of what he thinks is going to be an enormous de-leveraging event just over the horizon. Ordinarily, I take financial advice with a grain of sand and a shot of scotch, but this guy is just way too smart to give this type of advice on a whim. He is neither taken to idle chat or known for giving bad advice. When he volunteers something to me, it is with forethought and as a friend. This advice was unsolicited, yet appreciated and I am seriously thinking about following it. His opinion is that we will see de-leveraging on par with 2008 on steroids, and that silver may be shoved [on paper anyway] back down below twenty, and quite possibly, as low as thirteen or fourteen. At the worst, I will limit my gain to 90% and silver will continue to rise. At the very, very worst, I will lose whatever premium I will be required to pay to repurchase what I sold if the prediction is wrong. Remember, this is from a guy who lives and dies by the market. Right now, he has buyers coming in with IRA money and 401-K money who are recently retired and want to see a bigger return on their savings, so he believes, perhaps rightly so, that when the paper mountain catches fire, it will be unstoppable.

Opinions??

I think we're all kind of feeling that the dam is about to break again.

A good friend and I had lunch today. He's known me since before I started prepping. Last year he made a comment to another mutually good friend of ours that he was afraid I was becoming an 'Alarmist'. Today he was asking about gold and silver. Not exactly a complete 180* change for him, but he's a smart enough guy to want to learn about things.

Since he has a wedding coming up, I can understand that he's stuck with a pretty tight budget for the rest of the year.

Bottom line of our conversation is that he now knows where to shop online for PM's, to put buying a house on hold, and to stay in the condo that he owns. I explained to him that the robo-signing foreclosure settlement properties aren't even saturating the market yet and if he buys soon he would be in danger of further devaluation. Maybe not in this exact part of the country, since as I understand it most of that bullshit is located out in states to the west. I just don't want a friend to get burned.

There's another way if you trade. Keep your phyzz - just buy some short-silver etf. If it goes up, you make money on the trade, which compensates you for the loss of any value on your physs. If it turned out to be a bad idea - you get out quick, and lost a very little - but you never paid any vig on the physs either...

I do this around my core PM holdings all the time - it works, but you obviously have to pay attention, as with any other trade, and most of the short etfs have decay from leverage, so it's only for short terms that it really works well.

ancona said:

... His opinion is that we will see de-leveraging on par with 2008 on steroids, and that silver may be shoved [on paper anyway] back down below twenty, and quite possibly, as low as thirteen or fourteen. ...

Opinions??

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I started buying physical in earnest in 2008. I imagine that should the markets seize up like 2008 again, there will be a rush for physical even bigger than what we saw in April 2011 when dealers were running out of Silver Eagles.

ancona said:

I have been speaking with my LCS who has advised me to dump as much as twenty percent of my holdings [some of which he sold me] because he feels something is on the horizon to cause de-leveraging on par with 2008, only on crack.

Suffice it to say I trust this man and count him as a friend....

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I know you say you trust this man and count him as a friend, but be very sure that this is not a case of of a scare tactic in order to get some of your physical.

Most good dealers will never advise their customers to 'play the market' with physical. He thinks it is going to drop, but he wants you to sell some of it to him? Call me a skeptic, but it doesn't sound right.

Wow, nice insight, Jetstream. Sorry if it is labeled as 'devil's advocate', but I think it raises an excellent point.

Never trade physical. One entry, one exit for each ounce. If you want to hedge, do some with you paper fiat.

I hear you guys, believe me I hear you. I am the eternal skeptic, sort of like the guy who won't jump in the water until I see others do it first, because I don't trust the guy who says "C'mon man, the water is plenty deep". Uh huh, then show me and jump in first.

I haven't sold anything as of yet, but do from time to time to catch some arbitrage. Most of my stack is permanent ownership metal, meaning it is there forever or until I need to use it in retirement or collapse, the little bit I hold aside to play with is about 15% of my stack, and was bought in the very low twenties. If and when I sell, it will not be ASE's anyway, it will be generic stuff.

BTW, thanks to everyone for their concern.

If you are truely worried about dropping prices, why don't you use the paper market as it was intended and buy some put options on your holdings. If prices go down you can sell your holdings are current prices and buy back in at the lower price point. If prices go up, you eat the cost of puts, but have physical metals worth more fiat.

That's what I was suggesting. Paper for trading, physs for stacking. I find options all too often overpriced myself - I'm learning, but...so I just do things like short SLV or GLD when I want to hedge. That can go a couple ways.

A: you make money on the paper trade. This implies price went down. So now you can use that profit to buy more physs - cheaper too - which would be the same idea as selling physs now, and buying it back cheaper, except without the vig. Online trading, 10 bucks a trade, more or less.

b: You break even. Well, you lost commisions twice. Not a biggie.

C: You were wrong and lost money on the paper trade. This implies physs went up.
All that happened is you didn't get some of that gain.

All this depends on how much you hedge - the entire stack, or just some piece of it.

When shorting, I like to short one of the "amplified" etfs if I can find one. For example, instead of going long FAZ, go short FAS - this way, the fees and time decay are working for instead of against you.

Just my $.02. I like shorting better than going long a short etf, as you'v extracted the cash right away. Unless the entire market goes MF Global, you got the money upfront...after all, weren't many concerned that GLD was mostly fake-rehypothected? If it turns out to be a sham and goes to zero or 1/10, you really wanna be short at the time!

Sentiment is compelling...

I've thought about it & still do.
My gut takes over then & I end up adding to the meager stack..

dereksatkinson said:

Never trade physical. One entry, one exit for each ounce. If you want to hedge, do some with you paper fiat.

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Concur with this entirely.

I agree with holding the phyzz and playing the paper, but I can't help but notice the TIMING of this thread and an email from goldsilver.com where they are advertising Maloneys exit stategy. A stretch, I know, but before we can connect the dots, we must first acknowledge that they may or may not be there.

I would entertain thoughts of selling and buying... but I lost a significant portion of my metals in an unfortunate boating accident. And then I lost the rest trying to get it back playing in a poker game! All gone....

Dumb, I know!

dali lambone said:

I agree with holding the phyzz and playing the paper, but I can't help but notice the TIMING of this thread and an email from goldsilver.com where they are advertising Maloneys exit stategy. A stretch, I know, but before we can connect the dots, we must first acknowledge that they may or may not be there.

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I think about that stuff all the time Dali. I always wonder if information is or isn't released from "trusted sources" in such a manner as to lead [not necessarily control] the herd in the right direction.

I have always felt that on a few sites I frequent for information, there is at least one guy who is widely accepted and liked, has good advice, is sympathetic to the wider audience, but from time to time he/she says something that "toes the line" so to speak. That has ALWAYS bothered me. I remember when SilverSeek was a pretty straight up and honest site. Back then, and by "then" I mean more than a couple of years ago, you could count on their observations and analysis. Now, they have been co-opted by the likes of Peter Spina and have allowed their forum to degrade in to a kindergarten style name-calling sweat pit. They have been co-opted and ruined. When reading forum these days, I tend to use my bullshit filter on level 9 most of the time, because I firmly believe many of these trading houses pushing paper have guys in a boiler room somewhere supporting their operations in the forums by trolling and stepping on threads that call them out. am I a little paranoid here? Probably, but if Kennedy had been a little more paranoid, listened to his little brother and done what he was advised, he would never have been shot.

Dont do it.

Cash and carry. Do not churn. Put it this way- I dont do it. Maybe you like to play fast and furious. I will get no more 2nd chances- so I will stay put.

Hey, I've said nothing against "more phyz is mo bettah".

I have said things about readiness and doing well within the sheaf of likely things probable to go down, though.

If you're worried about the value of your stack - which could be bad at the wrong time, like anything ( I need fire! Damn your gold.) - you can set up to be able to do what you want around it. Remember, possession is 99% of the law. And we ...(working on the right word) about others actions who actually have the stuff. Well? We actually have the stuff too. You don't need to chose to work around it for best security at all times - you might be more complacent, but there are ways to get more, off the fear wiggles, that use the fact that *you* own some already to advantage.

Why would it not be better to set yourself up to play the current game, since it's so cheap to do - and has definite advantages - freedom to do what you want instantly, for as long as that system lasts. You don't have to put a lotta value into the system to reap its benefits - if you do your part.

Life is like that show lets make a deal. Does he want door number 1, 2 or 3.

In this case- an ox and a cart awaits all 3 doors.... (a paper one!)

ancona said:

)(...) because I firmly believe many of these trading houses pushing paper have guys in a boiler room somewhere supporting their operations in the forums by trolling and stepping on threads that call them out. am I a little paranoid here?

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...I don't think you are, why shouldn't they do that? Even online product reviews are rigged by paid "User Review Trolls", why should such an important barometers to monetary policy & banker's grip on people's throat have been overlooked?

Funny coincidence, have just came across that story about the algorithm that can mark these "review spammer groups", so it is not paranoia, it is a fact - they do exist. Why shouldn't they do the same for influencing markets?

http://www.engadget.com/2012/04/17/researchers-out-faux-product-review-groups-with-help-from-google/

and the paper, that the above article refers to:
http://www.cs.uic.edu/~liub/publications/WWW-2012-group-spam-camera-final.pdf

so, "they are out there", watching, and possibly acting as well.

Gold and, to a lesser extent, silver are stores of value for wealth preservation. One must never lose sight of that primary truth.

Wealth is preserved by holding them and wealth is created (made) by the judicious use of them at the right time.

I would only recommend selling if there was something else that was either a necessity or an opportunity to invest in something that brought a return on your investment.

You should always keep a certain amount of cash on hand for the normal 'stuff' of life, and so your PM's do not get involved in the daily or even monthly issues that come along.