Privacy-friendly gold futures from Dada

[Dave Ridley]

If you've been wanting to grab up some precious metals but don't have the cash on hand to do it, here is an idea.

Harry Browne used to say buying metal futures is a good way to preserve future earnings against inflation.  It's also a way to take advantage of bargains in the market when you don't have any dollars to invest at the moment.

For the uninitiated, futures are defined as purchases or sales of commodities for future receipt or delivery.  Usually the buyer pays nothing until the delivery date, but *is* committed to buy when that date rolls around.

However there are downsides to most futures investing, and I'd like to make it possible for you guys to overcome some of them.

First, although I haven't checked every broker, I assume you have to give quite a bit of personal info to any company you buy futures from.   That information probably includes your SSN, which likely ends up in front of various company employees and sits in a corporate  electronic database of the type identity hackers like to raid. Second, you generally don't get physical posession of the metals.  Third, there is a bit of hassle involved picking a trading company, filling out paperwork, etc. Fourth, you may have to be somewhat "inside the system" to engage in this sort of trading.

I'm guessing it would be easier to simply contact your old pal Dada and say "hey I want to order some platinum."  Then we could settle on a price and a delivery date, perhaps six or twelve months in the future.  You'd pay nothing until delivery.

I know I could have used a service like this at least twice over the last year or two since I got started in metals.  I can assure you it's a bad feeling to have the sense that the last train is leaving the station and you don't have anything to put on it!   So I'm assuming such a service will be of interest to some of you as well.

Here is one scenario how it could work:

Let's say you had decided to call me and place an order of 200 silver rounds on July 10, for delivery three months later.   The spot price on the 10th was exactly $11.00 an ounce.  I probably would have had to pay about $11.90 an ounce to obtain the rounds once you factor in expenses.  I would also have charged you a markup, probably around four percent.  So you would have ended up paying me $2475 upon delivery in October...$12.38 an ounce.   

You would have likely entered early November with the chance to make an instant profit, since the spot price by then was up to $13.00 an ounce.  And in the meantime you would have spent nothing.

So next time you are feeling metal-hungry and cash-poor, or you sense a metal is about to go up and want to take quick action before it does...Just gimme a shout.  We'll see what I can do and how fast.

Obviously I am not a rich dude and don't always have dollars on hand to invest on your behalf.   There could also be a delivery delay if you don't see me very often....or a shipping cost if I have to mail something to you. But more often than not I'll be able to do something that will work for you.

I'm at (603) 721-1490 or you can PM me if you want to make an order. 

[error]

I'm always cash-poor; virtually everything I make goes right back into my own business.

On that note, though, how do you keep silver from tarnishing, or clean it when it does get tarnished?

[Dreepa]

On that note, though, how do you keep silver from tarnishing, or clean it when it does get tarnished?

Silver Polish?

[toowm]

Great idea Dada. What you are proposing is more of a forward than a future. I know you are usually comfortable holding the metal if a deal falls through, but you should consider your risk if the price declines more than a little. Maybe agree up front to arbitration?

[Quantrill]

I'm curious how someone goes about getting started in investing in metals.  Any books to read through?  Totally random guesswork?  Investing in metals sounds better than stocks.  I would think that gold/silver would always be worth something, stocks seem too risky...

[Dave Ridley]

I'm curious how someone goes about getting started in investing in metals.  Any books to read through?  Totally random guesswork?  Investing in metals sounds better than stocks.  I would think that gold/silver would always be worth something, stocks seem too risky...

One simple thing you could do would be to go by kitco.com and place a little order with them, probably for silver.  Once it arrives start experimenting with it, see if you can substitute silver for FRN's in some of your transactions.  This will work best with friends and family....you can always accept it back from them as payment.   A sure fire way to "spend" silver is to put it in gifts or in Christmas stockings.  It's literally a present everyone welcomes.   Folks at fruit stands and garage sales will usually accept it.

Next time you're in-state look me up and maybe I can sell you some too, or maybe I will want to buy. 

It's fun just to learn by doing. The first time I ever bought silver bullion, last year, I just bought a little and experimented with it to see how easy it was to sell at a profit.  I sold most of it within a few months at about a 20% profit because the market jumped.  If the market had slumped I would have had to hang on
to it perhaps years to make a profit.

Everyone has a different formula for when to buy and sell, but for me I just try to buy when I can and sell when I can calculate that my sell price is a certain annual percentage higher than my buy price.  The annual percentage I use during this favorable market is about 25%....in other words if I bought one month ago and can sell at a price that is three percent higher than what I bought for last month....that works out to a thirty-six percent annual profit.  So I sell.

It's also helpful to look at the history....kitco.com has good historical charts.   Where we've been is a good indication of where we'll go. 

Silver and gold are not normally better investments than stocks by the way and stocks aren't that risky if you're willing to leave them in for more than ten years.  Over the last three months stocks have outperformed metals, and that is the norm.   Over the last couple years metals have outperformed stocks, and that is *not* the norm.  Right now though the theory is that we're in a "secular bull market" for gold, where metals outperform the other markets.   The last time that happened was in the late 70s...and gold went up to about $2200 in today's dollars, silver up to $130 in today's dollars.   That's what apparently happens to these metals when you have double digit inflation and attempts to corner the market.   They would have gone much higher if we'd had hyperinflation, but presumably not as high if it weren't for the Hunt brothers and their attempt to corner silver.

[maineiac]

I'm curious how someone goes about getting started in investing in metals.  Any books to read through?  Totally random guesswork?  Investing in metals sounds better than stocks.  I would think that gold/silver would always be worth something, stocks seem too risky...

Your instincts are sound, IMO.

My PM investment philosophy is fairly simple: whenever I accumulate funds earmarked for savings, I convert into gold bullion. I believe we should save hard money and use government coupons for daily expenses and purchases.

Others hold a trading position as an income source, e.g., Dada, but this is a business model, as opposed to an investment model, IMO. I think this course should only be undertaken vocationally and not as an avocation.

My other quick rules:

Always take delivery of your PM's. PM paper is still just paper (bird in hand principle).

Don't get hung up on the daily fluctuations of PM spot prices to the detriment of your mental health. Your/my PM's are intended for consumption in the golden! years!

YMMV