The Psychology of Stacking Precious Metal

Greenman

Greenman

Active Member
Silver Stacker
There have been so many posts on this forum regarding why/why not stack precious metal. Some are quite educational, others are as deep as a sand bar:rolleyes:. Does anyone want to dig a little deeper? There are so many angles we can advance this subject. Allow me to prime the pump with 2 cents worth:

Have you ever noticed that when we have a fist-full of dollars, the temptation is to convert it into something desirable, something fulfilling, something of value to you? It might be a hobby, shopping, the latest sporting goods etc. It could be anything! Doesn't it feel good when those notes are converted into something that you value? Satisfying?

Once the transaction occurs and we gain possession of that thing we perceive as valuable (at the expense of those dollars we handed over), we feel enriched in some way. That feeling might last a few moments or it might last considerably longer, and is dependent on how long we continue to value the item. Regardless of how long it lasts, the feeling is there!

Why is that?

Why do we have such a desire to convert our moneyor should I say dollars into something of value?

Why not value the dollars in and of themselves?

Even a typical tradesman hardly values dollars in and of themselves. Why is it that a tradesman won't do additional work for you on top of a quote if you offer them an extra $100, but you turn up with a slab/carton etc. of beer ($40), and they will bend over backwards for you?

Could it be that deep down, we intrinsically know that converting dollars into tangible assets provides us with a net gain, for we are receiving something of true value?

Now I understand we need to eat, shop, buy, be entertained etc. I'm talking about the bigger picture here. Why is it that the conversion of dollars provides us with such fulfillment? Don't you miss those dollars?? The smell, the feel:rolleyes:

What does this have to do with precious metals? Well, if you came across a $50 note on the ground as you walked down the street, would you think, "Wow, what a beautiful note! I'm going to keep it and when I grow old, pass it down to my children". No! Immediately we think, "I'm going to convert this into".

If you came across an ounce and a half of .999 silver (just a different form of money, but the same price), would you immediately consider what you would convert it to? I doubt it. Perhaps not immediately, anyway (and when you did, it would be converted into something you value, not the dollars themselves). The silver has value in and of itself. This is one of the reasons we call it money. Those dollars are pieces of paper with ink on them. Not only do they have no intrinsic value, we actually desire to convert them! They are merely there to offload ASAP into something of value.

When we convert our dollars to a thing of value, it is satisfying. When we convert our precious metals to a thing of value, does it feel the same? I contend that it doesn't. Why is that?
 
I need to address the tradesman part. Most wont do extra work because you put their scedule out of whack instead of being at the job tomorrow somewhere else they are still at your house & have to ring the other jobs (sometimes many ) to explain why they cant come . & then people badmouth tradies for being unreliable or wont do extra work . . .... You cant win .
I can tell you its got nothing to do with money

When we convert our dollars to a thing of value, it is satisfying. When we convert our precious metals to a thing of value, does it feel the same? I contend that it doesn't. Why is that?

To answer your question above ....I cant ive never sold any metals ....yet
 
I disagree, there are many people who are very reluctant to let dollars go, even though they must convert them for goods or a service they feel bad that they have to let those dollars go

As for precious metals, if they ever become a standard of currency it would have the same affect of dollars, it would still just be another instrument of life

If currency were to be once again silver or gold backed then we will have problems, how easy would it be to lose a sov or a half sov? Or even an oz of gold? Or wait carry a thousand dollars worth of silver around in your pocket, oh what's that?? Your pants keep falling down because you have a 1kg lump in your pocket???

Surely it would be easier to just Print a note that is attached to the precious metal, but who controls this? And who says that is is really backed dollar for dollar?

Sorry to just ramble off in the end but my point is currency is currency
 
Currency is currency, assets are assets.

That dollar you hold onto today devalues over time.

Converting it into an asset (precious metals, real estate... whatever) gives the possibility of retaining or increasing the value of that dollar over time (hopefully at better than 3.5-5% p/a).

Spending money for assets makes me feel good as I am increasing my effective savings pool.
Trading assets for assets less so, its just value transference (hopefully to something with better yield)
 
Not sure if I'm interpreting properly but the fundamental rule of a voluntary trade is that you value the thing you are getting MORE than the thing you are giving away (or for stuff you've never had before an a priori expectation of greater value). Hence once you have traded you are more satisfied with the thing you bought than the thing you sold (all else equal). How much happier is unknown and differs from person to person but because you are happier with the thing you bought than the thing you sold someone (all else equal) has to offer more than you paid for it before you'll sell. Basic welfare theory of trading. (I'd search and paste a link but writing this on my phone.)

Another thing to keep in mind is that the fundamental welfare you recieve from a given thing falls as you have more however (with some qualifications).

Money DOES have value in and of itself beyond the number printed on the note but at a certain point people only value the note by the number.

Hence, Trading fiat for silver means that you value the fiat LESS than the silver (else why trade). Once traded however, someone has to offer you a MORE than the original fiat price you bought at (because you value the silver more than the fiat so you'd be losing welfare if you simply accepted what you originally paid). How much more could be quite a lot.

Notably however is that the seller of the silver values fiat more than the silver and hence you'd have to offer the silver at a lower price before he would buy it back.
 
Good Psychology, you have captured maybe 70% of the people pattern. However, as DanileM said, I do know some of the people are keeping their notes as treasure, try to save every cent where possible.

To me like buy stuff before you know stuff like new looking branded cloths, mobile phones, laptop (I got 2 x MacBook Pro), some stuffs I don't even know why I bought it. But that's all changed now after stacking PMs.

Still I love spending money as soon as I have it. What do I do now?Instead buying some goods which its devalue (deprecated) quickly, but mostly buying PMs. I can still satisfying my shopping hobbit and stores my wealth.
 
I read, many years before I started staking, that money (fiat was being referred to) is the only thing that gives you value when you give it away. Money, regardless of its form, is the common unit we trade our time and energy for so we can exchange it for the product of someone else's time and energy that we value. Hence, we as stackers, can't wait to exchange fiat for tender with intrinsic value - because the fiat one day will bring nothing. The PM with intrinsic value we will then exchange for the product of somebody's time and effort to once again get things we value
 
I enjoy spending money before i have it :lol: Occasionally I'll think about how much I can spend on my credit card for a couple stacks of silver eagles when I'm speculating during dips .

I used to not like uncle scrooge when I was a child, but I think we would have a lot in common these days :)
 
Last week we had some Chinese food delivered.

Throughout the meal I kept thinking, "wow, this meal cost us two ounces."

But it was tasty, and very worth the price.
 
bordsilver said:
Not sure if I'm interpreting properly but the fundamental rule of a voluntary trade is that you value the thing you are getting MORE than the thing you are giving away (or for stuff you've never had before an a priori expectation of greater value). Hence once you have traded you are more satisfied with the thing you bought than the thing you sold (all else equal). How much happier is unknown and differs from person to person but because you are happier with the thing you bought than the thing you sold someone (all else equal) has to offer more than you paid for it before you'll sell. Basic welfare theory of trading. (I'd search and paste a link but writing this on my phone.)

Another thing to keep in mind is that the fundamental welfare you recieve from a given thing falls as you have more however (with some qualifications).

Money DOES have value in and of itself beyond the number printed on the note but at a certain point people only value the note by the number.

Hence, Trading fiat for silver means that you value the fiat LESS than the silver (else why trade). Once traded however, someone has to offer you a MORE than the original fiat price you bought at (because you value the silver more than the fiat so you'd be losing welfare if you simply accepted what you originally paid). How much more could be quite a lot.

Notably however is that the seller of the silver values fiat more than the silver and hence you'd have to offer the silver at a lower price before he would buy it back.
Click to expand...

The Law of Diminishing Marginal Utility. (It may explain my silver bear outlook bordsilver? :lol: )

A psychological generalization that the perceived value of, or satisfaction gained from, a good to a consumer declines with each additional unit acquired or consumed.

Read more: http://www.businessdictionary.com/definition/law-of-diminishing-marginal-utility.html#ixzz2IGZw7sHQ
Click to expand...

And for the aural learners amongst us:

http://www.investopedia.com/video/play/law-of-diminishing-marginal-utility/#axzz2IGYdVEwr
 
^ Yep the law if diminishing marginal utility was part of it (I'd forgotten the name), but mostly I was trying to explain another law (whose the name I can't remember either). Essentially if you buy something for $50 today, all else equal, someone will have to pay you more than $50 tomorrow before you are willing to sell. Experimentally tested/verified.
 
grinners said:
Time Value of Money?

http://en.wikipedia.org/wiki/Time_value_of_money
Click to expand...

Nope.

It's to do with the relationship of subjective valuation and market prices.

R.P. Murphy said:
Let's start with the basics. When two people engage in a voluntary trade, they both benefit. In other words, they both walk away with the "more valuable" object. As Updegrove realizes, this would be impossible with an objective property, such as weight; it's impossible for both parties to walk away from a trade with the heavier object.

But once we realize that value is in the eye of the beholder, then we can understand that people value objects differently and hence can each swap a less-preferred item for a more-preferred one.

What's really interesting is that this holds not only in barter where Johnny trades his bologna sandwich for Sally's peanut-butter sandwich, and both kids think they got the better end of the bargain but also in monetary exchanges.

For example, if I give a butcher $30 for a ham, it is because I value the ham more than the $30 in cash that I hand over. But, on his end, the butcher values my $30 more than that particular ham.

In this trade, it's not the case that I thought, "This ham is worth $30." No, I thought the ham was worth more than $30, if "worth" refers to the subjective value I place on it. If I thought the ham were worth $30, then why would I bother swapping my $30 for it?

Switching examples, if I buy 100 shares of stock at $10 apiece, we can conclude three things:
(1) I valued the 100 shares of stock more than my $1,000.
(2) The seller valued the $1,000 more than his 100 shares.
(3) The market value of the 100 shares equals $1,000. Someone else who owns, say, 50 shares of the same stock would think that it constituted $500 of wealth in his portfolio. All that statement means is that the last traded price was $10 per share.

Once again, we see the importance of distinguishing between subjective valuation and objective market prices.
Click to expand...
 
What else can you buy that has a live global price almost 7 days a week 24hrs a day? Even crude oil has different prices at different places on the globe at any given moment depending on local supply and demand.

Anything else that is so pure and 'standardized' that you can perfectly compare and know it's .999% exactly the same?

What other things out there can you trade for your dollars that doesn't DECLINE in value over time? The finest wine will spoil after a few decades, and even faster if it's not in perfect storage conditions. I've spent thousands on piles of electronic gizmo junk that seemed like great idea at the time, and now it's worthless and obsolete garbage.

I just can't think of anything else. My 12 year old car has now lost 99% of it's original purchase price. How about other commodities? Food spoils. I don't have the space and ability to store fuels safely.
 
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