The BTFD Fallacy?

The handy website Compare Silver Prices recently made an alteration to their page layout: Now, when  a user places their arrow over the price from a company, a nifty graph pops up showcasing the premium-price relationship in the last month for each dealer and each coin. Heretofore, a major tenet of bullion buyers has been to “BTFD,” but what Bernank’s graph shows is that, when the silver price falls, premiums pop. That means that, less so than prior thought, “BTFD” is not necessarily a bulletproof philosophy, although it can still save the premium-sensitive bullion buyer plenty of money.

It will be important to remember this notion in the future, as I expect premiums will grow more sensitive to the volatile silver price, and the “BTFD” philosophy might dissipate into a buy always philosophy.  I personally advocate a “buy when it is comfortable and sensible philosophy.” In other words, take care of your life’s needs before tying up all liquid capital into bullion. And, whatever you do, do not put all your eggs in the basket of one particular price. Space purchases out over time. And now, when the CSP addition of price-premium relations, you can space these purchases out based not only silver price, but also premium prices.

At Liberty Coin & Precious Metals, when the price of a Silver Eagle at the store fell recently (around the 2nd of November,  from $34.60-$34.40, the premium for a Silver Eagle popped from 8.75% over spot price to 8.86% over spot price. In contrast, when their Silver Eagle price recently popped from $34.50 to $35.20, the premium at LCPM dropped from 8.85% to 8.62%.  I believe what this data implies is that one must remain price sensitive on into the future, but what price sensitive means must be redefined to include the behavior of dealers in correlation to price movements.

At APMEX, for example, with their sell price for a Silver Eagle at $36.20, their premium was about 14.2%. When their sale price on the same coin was $36.90, their premium was 14.2%. While “BTFD” can still save people money, it is not as much as previously internalized.

After their sale price on the Silver Eagle hit a high of $36.25, their premium was a low of below 12%. While their sale price was the lower $35.55, their premium was over 12.4%.

Kudos to the Bernank, and we here at Silver Vigilante look forward to more innovations by the Compare Empire.

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