Even my mom does not understand!

(And mom taught me so much!)

Silver Stock Report

by Jason Hommel, January 16, 2009

There are a lot of people who DO understand what I'm doing with silver auctions, and I fully appreciate all of your support.  But many don't, and I'm here to explain to help them.

I mean no disrespect to my Mom.  I love her.  And she's an extremely bright lady.  She was an A student in school, she scores 130+ on IQ tests, tops on her real estate exam, and she was in the top 4% of real estate agents in Sacramento.  She even became a Real Estate Broker and Mortgage Broker.  She was even sought out to do radio shows for a while for her expertise in real estate.

Tonight, my mom wrote to me:

It is because there are not enough buyers at www.SeekBullion.com to absorb that many ounces of one product that fast. You have to list some each day, instead of all at one time for once a week deals.  I know that makes it easier for you, but not for the customer.  Also there is a lack of interest in the 100 ounce bars in general right now.  By the way your photos are good. Try giving me a few to list on eBay!  I haven't had any of the bars I have listed expire unsold. My latest one sold for $1295. You also turned off a lot of people by the practice of bidding on your own auctions. I read your rationale, but even I have a hard time buying it.  Just list them higher like I do. Or take what you get. It is hard to have it both ways, and people know it.  Love, Mom

To top it off, my mom tonight called me to ask, "What's proxy bidding?"  Thank God she is asking.

First, to explain proxy bidding:  All bids placed at seekbullion are the maximum bid you are willing to pay.

However!  You only need to pay the minimum bid increment higher than the second highest bidder to win, and the web site software automatically places the smallest possible bid for you, like a smart R2-D2 robot would.  That's called a proxy bid.  In essence, the site bids for you, in your place.  So, if someone else had already placed a bid of $1200, and if you bid 1300, your bid is entered at $1201 automatically, if the minimum incremental bid is $1.  And if the minimum bid is $10, like my mom's auctions, then your bid would be $1210. 

So, next, if someone else comes along, and bids $1250, their bid is instantly outbid, and your next proxy bid is instantly entered in at $1251, (or $1210, depending) by the computer, by proxy, without you having to do anything.

Next issue.  My mom thinks I'm selling in "once a week" deals.  I'm not.  I'm selling almost 5 days a week, in the evenings, Monday, Tuesday, Wednesday, Thursday, and Saturday.  This week, I only missed Monday.  We will also miss Saturday, because Monday is a holiday, and I don't want to be exposed to price changes in silver until Tuesday.   

Next, once again, I need to explain why I place a reserve bid on my own auctions.

I list my auctions usually a day or two in advance.

During that time, even one day, the silver price changes.  I'm sure everyone can agree with that.

Now, if I list a reserve of "spot plus $1.50" from one to two days prior to when the auction closes, one of two things are likely to happen, both bad.

1.  The silver price moves down.  If that happens, it's bad for the customer/bidder.

2.  The silver price moves up.  If that happens, it's bad for me, which is ultimately bad for the customer/bidder.

Thus, it's best for everyone, the market, for me to determine "spot" as close as possible to the end of the auction, yet still well before when the majority of the bids take place.  This is why I must place my reserve bid about an hour before the auctions close, and I disclose what my price is, and that I'm the one bidding to set the reserve price.

This is NOT a shill bid, which is a bid by someone anonymous or under a hidden name.

This is not really any different than how stocks trade.  People place bids, and they place asks.  An "ask" is when a person lists the price they are willing to accept, and the amount of stock they have for sale.  I'm doing the exact same thing, within the auction format. 

It's not really that complex at all.

It's simply a reserve price, written in advance as "spot plus X", and placed in the last hour.

It's a reserve price that's more true, more accurate, than a reserve price set too early, since my reserve price may go up or down, with changes in spot price, as market conditions determine.

Think of it like this.  It's my silver.  Agreed?  I don't need to sell it.  I'm happy to be a silver investor, happy to hold it.  But I will sell it at a set price above spot.  And so, I do.

Here's another way to put it.  Yes, I could just start my listing with one reserve price.  However, if I have to compensate for an extra day or two of silver price volatility, my price will have to be higher.  Nobody wants that.

I want to sell at the lowest price that is profitable, and I'm still willing to take a loss, as the price may STILL change between when people bid, and a day later when they wire!

But I am not willing to sell out way too low, and I'm not willing to do "backroom" deals for rich multi-billionaires who can buy out my entire inventory and all the inventory of my suppliers in the same day.  I want everyone to be able to have an equal shot at buying my silver--that's the free market.

Nobody should be excluded from bidding, not even me.

Here's another way to explain it all.  Futures contracts are the opposite of silver.  Futures contracts are paper promises.   Silver is  payment in full.  Futures contracts are binding.  Futures contracts guarantee losses for one of the two gamblers.

I avoid futures contracts, as much as is practical, to strive to participate in the free market as much as possible.  I refuse to participate in futures contracts, to every extent possible. 

To minimize my own futures contracts, I deal as close as possible to the "here and now" when I trade.  I don't want to set prices long in advance, that's a futures contract, which is everything I'm striving to avoid.

I suppose I could place an auction, 5 days in advance, and set a reserve price of "spot plus $5/oz., plus $1.50".  The extra $5/oz. is to compensate for the volatility, but I think that's enough to make the point. 

Futures promises don't work.

I aim to work as close as possible to the spot price.

I don't know how other bullion dealers can accept checks, and then have hold times of up to 10 days.  Do you know how large my vault would have to be to store every order for up to 10 days?  And that would be a very complex vaulting operation.

And any dealership that is 1 month behind on orders is clearly just scamming people.

Interestingly, I receive the harshest criticism on the forum run by a bullion dealer who is over a month behind on orders, still, and still has no 1 oz. rounds for sale.

https://www.kitcomm.com/showthread.php?t=31755

Excerpt:

01-09-2009, 09:17 PM
tardyviking
  
Join Date: Dec 2008
Posts: 2

Default Kitco Shipping

Hi. Last month was the first time that I ordered from Kitco. Today I received the invoice for both of my transactions in the mail, but no product. Is this common? I searched the threads and could not find anything specifically related to this. I am eager to get my hands on my coins! Seems to me like the invoice and product would come together on the same day.

Old 01-10-2009, 01:47 AM
aceswired
    
Join Date: Dec 2008
Posts: 26
Default

I too placed a first order almost a month ago. Waited the three weeks (plus a bit) for the check to clear from the date they posted receipt. Still no shipping date posted. I emailed and asked when I'd get that, got a curt note telling me to check the account.

Nothing there. No shipment date, courier, number, or anything. Less than impressed with service so far, to say the least.

========

Meanwhile, my harshest critic on the Kitco forums, is anonymously stumping for Kitco. 
Or perhaps a better word, is that they are a Kitco SHILL!

 Got Goldies  Got Goldies is offline
Member
    
Join Date: Oct 2006
Posts: 16,568
Default
Why do you need delivery if they aint got none? Go with pool. They'll give part of 1000oz bar. Free storage, makes sense.

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Finally, some people continue to ask me why I'm selling if I'm bullish on silver.

Very simple.  I deal in bulk.  Very few can.  And so, I do.

I can buy 1000 oz. bars at the spot price plus shipping costs, and have them made into 100 oz. bars and coins.  Very few people can do this, due to the very large capital requirements.  I own nearly 200,000 ounces, yet I can barely sell 5000 ounces per day, see?  In fact, very few people did this for nearly 15-20 years!  Most silver rounds that I've seen were made in the early 1980's. 

I've long preached that silver could go up 50% per year for 15 years to reach $8000/oz., based on there being that much inflation that will show up in rising silver prices.

There's another way to make 50% per year.  Make 1% per week, dealing silver.  Actually, that will help you make more like 60%.

Thus, it pained me to see silver premiums at 50% over spot.  I had to start selling, for two reasons.  First, to help people get into silver more cheaply, and second, to help myself make some money! 

Every single owner of silver ought to be a dealer of silver, ought to advocate silver, and to help other people who may want to buy silver.

And that's also how silver will begin to circulate. 



S



Sincerely,

    Jason Hommel