Was it Skill or Luck?

May 10, 2011 by Jeremiah | 0 comments

I knew a guy back in the eighties. His name was David. He was a stockbroker in Vancouver, BC, Canada. He was an expert in mining stocks and we made quite a few trades together, based on his recommendations, and made some very good money. He told me then, back in the eighties, I should invest in silver. He also told me that I should avoid banks.

Should I buy stocks that have silver mines? Or should I buy junk silver at a coin dealer? How should I buy it and in what form? That was a big question I had.

He never really told me how to hold silver, and that was the big problem I had with buying silver. We live in an O.K. neighborhood in Santa Fe, New Mexico. But like any neighborhood we have our share of crime. I didn’t want to have a pile of silver sitting in my basement and I wasn’t all that crazy about stocks that had physical assets like silver mines, etc. The stock prices were too cyclical and I was not comfortable with the costs of the metal extraction. Too many variables for my liking.

So I put buying silver on hold. David told me he was going to be making some changes to his business, but that he would keep in touch, since he and I had such a good relationship.

I was going through some changes as well. We had started a family and other things got in the way of investing so I lost touch with David. I called his firm several times, and at the beginning, he was not there and then they told me he left the firm. We lost touch.

But always in the back of my mind, was his recommendation that I should own silver. I heard about an Exchange Traded Fund (ETF) that was a silver ETF. The symbol was SLV. ETFs were new at the time and I wan’t knowledgable about them. So I kept this on my radar and added it to my watch list of stocks in my portfolio tracker on Yahoo!

In 2005 I got really interested in real estate and attended several seminars from Ron LeGrande about flipping houses and buying real estate for no money down. I decided to sell some of my stocks to have money available for a war chest to buy real estate. One thing came to another and the more I looked into it, the more uncomfortable I was with the idea of “no money down real estate”.

I had money sitting in the bank so I decided in June of 2006, to buy the iShares Silver Trust. I got in around $10.50. I thought the price was pretty good since it was below the 50 and the 90 day simple moving average. Time would tell.

My portfolio design is complicated to most people. But I have a rainy day fund where I stash money that is not to be touched except for the intended reason. It sounds dumb, but that’s my method. My wife wanted to take some money out of the kid’s college fund to remodel the kitchen. I said no. My kids will tell you how much they appreciate their education and we still got the kitchen remodeled.

Maybe you read my post about my Early Retirement Curve Ball last fall. I didn’t go into it very much on the blog, but it threw a monkey wrench into my plans. I didn’t think of it as a rainy day, so I never gave my shares of iShares Silver Trust any thought.

On St. Patrick’s day I googled my friend David in Vancouver BC just for the hell of it and I got a hit. I had tried googling David a few times in the past but never got anything worth while. This year I did.

So, I gave him a call. We had a long talk. It was like we had never been a part for over 20 years. We just fell back into a natural easy rhythm – just like that. He asked if I had ever invested in silver. I laughed out loud. “What?” he asked. I had never thought about my iShares Silver Trust shares in a long time and told him what I had done. He said “You should sell what you have and get out.” He thought silver was headed for a ccorrection and now might be a good time to take profits.

So I did what he said. I sold out at almost $36. It was good for a 46% return each year for the five years I held it. What now, I asked him? Keep sitting on cash. There will be some good opportunities ahead.

In late April the iShares Silver Trust shares hit $46 and recently they have been trading at $36 or so. I’m happy. And I have used the profits from the iShares Silver Trust shares to take care of my Early Retirement Curve Ball. As is well here.

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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!