Monday, April 16, 2012
Money – Silver and Stock Tips
I have given plenty of investment guidance over my lifetime. Sometime people take my guidance and do well, other times they get upset that I won’t give them the latest and greatest stock tip. My guidance to many of the people I've talked to after asking a few questions is simple. Pay off your mortgage quicker. Another tip I gave people was to invest in silver. I started buying silver at $7 per ounce.
Actually, I got my first taste of silver back when I was in high school. My friend Brent had me over for Christmas one day, and he gave everyone a Christmas present including me. I must have been 17 at the time. It was a American Eagle Silver Dollar. I'd never seen one of these before. He told me it is worth much more than a dollar. Probably at the time it was worth around $4 or $5. I think I spoke with Brent a few years later and he said he sold his a long time ago.
In 2003 I learned more information about gold and silver. The fundamentals of these precious metals looked good. It's too bad I didn't buy a truckload at the time. However, I had very little knowledge at the time regarding precious metals. Better to be safe than sorry, and purchase a smaller amount. About 2 or 3 people I told about silver actually went out to get some. However typically people do nothing. People would rather listen to some sales person trying to sell them the latest mutual fund. Why? I think it has to do with the path of least resistance. Doing nothing or doing what every else does is the easiest thing to do.
Another problem with giving out stock tips is that I could give two people the same stock tip and one person might make money, where the other person loses money. It really is based on the sophistication of the person buying and selling the stock.
When I worked at Fidelity I remember one caller at the beginning of the stock crash of 2008 ask me if he should sell Lehman Brothers. The stock just hit $7 a share. I have had experience with companies that drop 50% sharply before. Typically they do very poorly such as Sigmatel (SGTL delisted in 2008), Boston Scientific, Delphi, GM, and Ford to name a few. The person was reluctant, and wanted to hold onto the shares. I wasn't able to place any stock trades at the time, and so I practically forced him to talk to a stock trader. Hopefully that person could convince the person to sell. While I was in college I gave a presentation on the auto industry for a finance class. I said that GM, the heartbeat of America needed a heart transplant before it goes flat-line. I suppose the heart transplant was having the government bail them out.
I also got a stock tip once from someone on an airplane. This was when I was just entering the Army. The man talked a good game, and I went online to purchase the stock. It was a penny stock, and it went busted. The moral of the story...get educated. If you are buying stocks, read the annual reports, and know something about PE ratios, future earning, CEO and officer salaries, among other things. Don't go out and blindly take someone's advice. Learning is an important step in the whole process.