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PennehChaos.
Penny Collector Member
USA
269 Posts |
 Posted - 10/08/2008 : 15:24:16
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It would be a bit of an understatement to say that I'm not a big stock market fan.
A big part of the reason for this is the volatility. How can stock X be worth $5 now, then be worth only $4.50 in a matter of minutes? It's completely divorced from reality.
Silver "spot" is the same way. It's gone down 10% or more in a single day. Did the supply of silver somehow increase by 10% in 24 hours? Did the global demand drop by 10%? No. Ridiculous.
And sure enough, the actual market value of "junk silver" coinage has been pretty resistant to the sudden decline in spot, as everybody reading this has probably seen first-hand. When spot was $18/oz, I got a $5 roll of Mercury dimes for $50. Now, when silver is $11/oz, I got a roll of assorted 90% halves for $100. When spot was high, it was fairly easy to find junk 90% for "less than melt". Now that spot is low, there are big premiums over spot for the same coins.
Watching/bidding on literally thousands of eBay auctions over the past six months or so, the average shipped price for smaller amounts of junk silver tended to be between 10x and 11x face regardless of spot.
Why? Because they have an intrinsic value that has nothing to do with the fake paper numbers that speculators gamble on. "Spot" is just one more high-stakes roulette game.
So unless you're actually buying and selling 1000-oz bars on a daily basis, why are we even watching the roller-coaster ride?
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Edited by - PennehChaos. on 10/08/2008 15:29:18 |
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fb101
Administrator
USA
2856 Posts |
Posted - 10/08/2008 : 17:13:33
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quote:
A big part of the reason for this is the volatility. How can stock X be worth $5 now, then be worth only $4.50 in a matter of minutes? It's completely divorced from reality.
Silver "spot" is the same way. It's gone down 10% or more in a single day. Did the supply of silver somehow increase by 10% in 24 hours? Did the global demand drop by 10%? No. Ridiculous.
So unless you're actually buying and selling 1000-oz bars on a daily basis, why are we even watching the roller-coaster ride?
Watching spot is a waste of time.
But there is a mistake in your comparisons. Never compare stock and PM. Stock trades as paper, but it is actually the physical asset. That is, a share of stock is a partial ownership in a company. Neither the company or the ownership can be held in hand or put into a safety deposit box because the "company" is not a physical asset, although it can own physical assets. The legal representation of your percentage of ownership in the intangible "company" is a piece of paper, and is therefore the asset itself.
As far as why can companies stock can vary so widely is because most stock ownership is actually speculation. I buy a stock if I believe the company will make money - If I own 1% of a company, and the company profits $500 a year, My stock yielded $5 profit, and that is either reflected in the price or in a dividend. If a potential buyer only believes the company will make $100 next year, he will not pay the same amount for the stock. That is what all this fluctuation (speculation) is all about. This is WAY oversimplified, but I'm not going to write a book here...
PMs are different. PMs are tangible assets with physical properties which can be held in hand and therefore the paper version is NOT the asset itself.
The reason there is such a jerk-around in PMs is because the "spot" price, in theory for immediate delivery, is still just traded paper, which history has proven may or may not actually represent a physically asset. Point is, spot price is still based on paper trade, not on physical trade. If I own a jewelry store and I want to make a piece of jewelry I cannot now buy any silver at "spot" and I can't make jewelry with paper promises. I have to pay the going price for physical, which right now is about $4 over spot.
So you're correct about that part. Ignore the spot price. Spot is what you can sell to Apmex for, or buy from Apmex for or somewhere in the muddle (middle) :) |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 10/08/2008 : 19:13:19
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The only reason to bother looking at the spot price is to quote said spot price when or if you are buying silver at a yard sale/garage sale or on Craigslist or a classified ad.
You can sell for higher price on eBay or on this forum, but there are still many who do not trust doing business over the net, prefer cash only deals (no taxes to report) or just prefer a quick deal over shipping silver and waiting for payment.
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 10/08/2008 : 19:40:44
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| The spot price + premium is still how the dealers and everyone else are pricing and selling. But the real factor that matters now is how much premium are they paying if you sell and how much premium are they charging when you buy. That premium is the fear factor that values physical silver higher than paper silver. |
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Should we even pay attention to silver "spot"?
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