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Trades You Should
Consider
There are a number of investment
situations which lend themselves to trading one product for
another. But keep in mind that trading is not always a good idea
because you increase your overall commission rate. In other
words there has to be an overriding reason in your favor before
considering a trade.
A few examples might help. Years ago
we recommended trading your gold bullion for platinum bullion
because the price of gold and platinum were close. Today it
would make sense to unwind that trade because you would end up
with twice as many gold ounces. In other words platinum may be
overvalued relative to gold so consider trading the higher
priced platinum for the lower priced gold. In the future if gold
and platinum move closer together in price it would make sense
to trade gold for platinum because platinum is about 10 times as
rare and over time a price inequity may arise you can turn to
your advantage.
The same kind of dynamic works for
silver. If you think silver is overvalued relative to gold you
would want to sell silver and place the money into the gold
bullion market. In the old days this type of relative value
trading was called Ratio Trading. There were actually ratios
developed by dividing the price of one metal by another. The
ratio was then compared to a historical average and action taken
accordingly. Today these ratios are less important but still
offer an indication of value. If you don't have a long term
opinion as to what precious metal is over or undervalued call
Ken Edwards (1-800-225-7531) and ask for an opinion.
Another potentially profitable trade can be
accomplished when the price of certified gold
becomes too low. Consider that in March of 1986 a
PCGS MS-64 Saint Gaudens was worth $2400. At the
same time a Krugerrand sold for $350. The ratio
between the two was almost 7 to 1 so an investor
could have traded his $20 for 6.8 Krugerrands.
In January of 1988 that same Saint Gaudens was
selling for $1300 and Krugerrands were worth $500
each. The ratio was now 2.6 to 1 so one could
sell his 6.8 Krugerrands and purchase 2.6 Saint
Gaudens with the money. The investor has more
than doubled his original position without
putting up additional funds.
A trading approach may also hold up if you are in a profit position on any given PCGS graded
rare coin. If for example you purchase a PCGS graded rare coin
for $2500.00 and you can now sell that coin for $6000.00
consider selling and replacing that certified rare coin with a
coin which has not done as well. Selling a few winners along the
way is a good way to judge overall performance and will keep you
up to date on what you own and what it has done over the years.
This particular approach works
well if the coin you have in mind has just be promoted by a
national coin dealer and may have a recent increase in
price. An example was the PCGS graded MS 63 $3 gold piece. At
their recent high we sold this coin for more than $12000.00 but as soon as the telemarketer stopped promoting the
coin's value fell. Today you can find nice examples at the bargain
price of around $6000.00. My point being that if you had one in
your portfolio you were in at say $4000.00 it would make sense
to sell it at the higher end of $11000.00.
So what do you do with profit? Don't
get out of the market because the real increase in certified
coins will come when inflation is running wild...think about
reinvesting in a coin which has not seen big increases. An
example would the PCGS $10 Indian in MS 63 in the $1600 range.
Finally consider trading lower grade
(modern proof sets or old circulated silver dollars)
for better PCGS graded material. Time has clearly shown that
higher grade rare coins perform much better over time.
Like I said, don't approach this
concept without clearly thinking out your objectives. But there
are times when trading one product for another can produce a
great investment advantage to you.
If you have any questions email me
for an honest opinion. Thanks for reading.
Richard Schwary (RSchwary@aol.com)
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