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Half a Blog Post, on Silver, and rwhadvisory LLC

It is about ten minutes after eight and I am at the store. Last night as I was loading inventory I listened to the most recent MacroVoices podcast featuring guest Ronald Stoferle. They covered many topics of interests, and the entire pod is worth a listen, as Erik’s always are. Check it out here: https://www.podbean.com/ew/pb-9q83q-de0932 . But the comments about silver had me checking in on the trade. I hadn’t been watching the silver trade very closely. Since I last wrote about silver on April 27, here, http://rwhadvisoryllc.com/silver-update-the-world-silver-survey/ when the closing spot price was $15.15 the metal is up 22% ending May at $18.49. Looks like it has taken a dive again so far in June, currently trading at about $17.99 as I write. Silver will continue to be an interesting part of the macro and monetary story, I believe. My take-aways? In the World Silver Survey the authors talk about and average silver price for the year of about $15.70 and a peak price of about $19. I would say so far their thesis is intact. Secondly, experts often talk about silver as gold’s volatile cousin, or sibling, or similar. I think in the MacroVoices pod I reference about the guest refers to silver as ‘gold on steriods’. During approximately the same time period (month of May) gold was up about 1.7%. I find May illustrates silver’s relative volatility.

Since I have my resale business, I continue to accumulate physical silver, but have not revisited a trade. I still have exposure to silver through my CDE trade (if you missed it you can read about it here: http://rwhadvisoryllc.com/one-of-the-days-in-quarantine/ . I am comfortable to continue in that fashion, as far as silver goes.

I have much, much more to write since last publishing. Coming topics will include:

  • Writing my own shitcoin on the Ethereum network
  • Orchid VPN
  • CA AB 2501 and reason # 47 on why MSRs are a liability, not an asset
  • Securitization of personal property and collectibles, or tokenizing them (ah…a peak at some of the thinking that went into launching Good Find Stores?)

So, getting this half-blog posted now and will return soon with these other topics.

Final thought: I had a former friend and colleague reach out to me the other day. She had seen my work anniversary notification on LinkedIn, and checked my profile. We haven’t spoken in about five years. She asked “Looks like you are consulting and doing retail?!”  The way I would say what I am doing is: I am building and buying businesses that interest me, and align with my long-term macro thesis and providing business planning, management and operations services, but only in exchange for equity-based compensation. But yeah, if you took a snapshot, I am totally doing consulting and retail. Specifically resale retail, which is an important distinction.

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One of the days in quarantine…

The markets continue to rage back and forth like never before, and obvious trades like shorting low-grade debt are stamped out in a moment by the latest, unprecedented Fed actions adding to the difficulty of this market. I discussed placing some limit put orders in an effort to go long silver at the beginning of the month and that those orders went unfilled. To clarify, I was looking at entering either SIL or SLVP, both silver ETFs. What I have ended with is a spread of options on CDE, Coeur Mining, Inc.

Coeur is a holding in both ETFs. It is a Junior gold and silver miner with holding primarily in the US but also in Mexico and Canada. I have gone long the security by selling the $8 put with a 9/2020 expiry. The option premium was $4.83. I used $0.45 of the proceeds to buy $2 puts with the same expiry, just to hedge away the last loss. So if I have to buy the shares at $8, they will only have cost me $3.62 each [$8 – $4.83 + $0.45 = $3.62]. The spot price was $3.13. I received a large payment of $4.38 net cash per share, have only $1.62 of value at risk per share, and have exposure to this security issue’s upside if elements of the current macro trend play out as expected.

The big-ticket macro features that I expect will impact this trade are not limited to my thesis about the gap up in silver prices. CDE will also benefit from the expected rise in gold value. And maybe most exciting and least considered is the potential impact that low fuel costs are going to have on the extraction price for metals. I expect these gold and silver miners to be printing money like the New York Fed before the end of the third quarter. Timing is always difficult though and it is possible that price discovery won’t have manifested in the stock price before my options expire.

I am also very cautious about what is happening with the dollar. I, like many, continue to expect a strong and probably rising dollar across this option period. A really strong dollar may be too much headwind for metals prices. Another risk is liquidity selling. If people just need money to live and must start selling their gold stash to stay afloat, increased selling pressure could serve to keep a lid on some of the crazy gains that would otherwise manifest.

I have re-visited this trade today during the trading session and it looks still available. There have been a few analyst actions on CDE since I initiated the trade. On April 14th Canaccord downgraded CDE from buy to hold with a $3.50 price target. B. Riley has maintained its buy recommendation and raised its price target from $11 to $13. Consensus estimate is about $6. The Q1 earnings call is scheduled for April 22nd. I will be excited to hear guidance and see first quarter performance.

Though I only took a pretty small position, I did not expand it today. I continue to approach the market and risk management with extreme care. This is a speculative trade, and investors should do their own research. I would welcome feedback on this trade an thank you for your attention.