When to buy and when to sell?

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When to buy and when to sell?

Post  Shelby on Wed Oct 22, 2008 1:15 am

It seems to me that the richest people are those who buy only when the seller is begging them to, and who sell only when the buyer is begging them to. Other than needing to sell in order to raise cash for another investment, or for funding life's pleasures, I think I might make that my new criteria for knowing when to buy and sell something. Thoughts on this model?

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Re: When to buy and when to sell?

Post  Yellowcaked on Wed Oct 22, 2008 1:55 am

Yeah, I wish I had about 40 million ounces of silver to sell right now. I would keep 20 and sell 20 and buy 30 more...

Check out this site: http://www.pyromet999.com/

They have about 1000, 100oz bars at Miles Franklin and they are selling like hotcakes they told me...

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Re: When to buy and when to sell?

Post  dz20854 on Wed Oct 22, 2008 2:17 am

1. In order to do that one must stay somewhat liquid. With value stocks each drop in price looks like the final drop, so it is easy to buy too much. Then there are no funds to buy during the real drop.

2. What constitutes liquidity: A world currency (US dollar), other currencies, gold and silver, any futures position with decent volume, large cap. stocks?

3. Many have learned the hard way that small stocks are not liquid, and no matter how much of a value they represent they should make up only a limited part of one's portfolio. Even though the percent should vary based on market conditions, it is easy to get stuck like a deer looking into headlights while conditions are rapidly freezing up. Especially when it has been eighty years since this last happened.

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Re: When to buy and when to sell?

Post  Peter Forden on Thu Oct 30, 2008 12:42 pm

Shelby wrote:It seems to me that the richest people are those who buy only when the seller is begging them to, and who sell only when the buyer is begging them to. ... Thoughts on this model?
Sweet model -- a very useful way of thinking.

I wish to add a little supplement -- something that fits right in with today's market in precious metals:
Don't buy until you can see a future sale on the horizon.

That's a lesson learned from 40 years as a businessman: Buying is easy; the hard part is selling.
That's why almost every industry has many salesmen, but you don't see any "buyermen".
So, my take on Shelby's model is this: before buying anything, I always try to plan how am I going to sell it.
Even though selling comes after buying, I always think thru the selling before I buy.
If a selling situation is not strong and clear, I don't buy.
(I will go on to some other deal, or will rent what I need.)

How about a practical example?
In precious metals, I have observed a lot of people who are not thinking as Shelby suggests.
In discussions (and Internet forums) we find many questions similar to, "What's better to buy, American Eagles or Canadian Maple Leafs?"
My response, "Buy now whatever will be easier (or more profitable to sell), when that time comes."

Until recently, American Eagles were just as easy to buy as Canadian Maple Leafs, and at virtually identical prices.
But I never bought any Eagles.
Why?
In the near future, anything connected with America will bear a discount on its intrinsic value.
Not so many people will be begging to buy.
As America falls into the abyss, her coins will bear a stigma, and be worth less than one would expect, while Maple Leafs, Koalas, and (genuine) Pandas are likely to bring their full value.
The Eagles may bear a discount to spot, because fewer people around the world want anything to do with anything from America.
Inside America, there will be less people with any savings, to whom you can sell.
As a result, the metal may bring a better price if the coins are melted and refined, a costly process.

So, you won't find me buying precious metals stamped with "made in America", because when it comes time to sell, I expect they will be a little bit less than precious.
I want to buy only things that others will -- someday -- be begging to buy.

-- Peter

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Re: When to buy and when to sell?

Post  Shelby on Fri Oct 31, 2008 8:18 am

Peter Forden wrote:...you won't find me buying precious metals stamped with "made in America"...

Another reason not to?

http://goldwetrust.up-with.com/general-f1/bullion-coin-designs-t12.htm#128

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How much of total bankroll to bet on each gamble

Post  Shelby on Sun Oct 25, 2009 12:50 am

http://en.wikipedia.org/wiki/Kelly_criterion#Statement

Famous mathematicians got rich using it:

http://en.wikipedia.org/wiki/Claude_Shannon#The_Las_Vegas_connection:_Information_theory_and_its_applications_to_game_theory

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