You Might Buy Silver if We Have Another COVID Situation

[Recyclersteve]

First let me get this out of the way. I'm a precious metals and base metals enthusiast, coin collector and also trade stocks with a passion. That said, I decided to look back at stocks that got hit in the early days of the March, 2020 COVID-19 outbreak and see which ones were really good buys in, say, March, 2020. Specifically I'm referring to items which rallied sharply over the following 6-12 months or so.

One that I just found out about shocked me because I didn't really think about it at the time. That is silver, more specifically, the silver exchange traded fund (Symbol: SLV). I mention this instead of physical silver because I figure many local coin shops were likely closed during the early COVID days. Also, the spreads on physical silver coins are sky high when compared with the spread on SLV, which is often just 1-2 cents a share. Also, many brokerage firms (like Schwab and Robinhood) don't charge commissions to buy stocks or ETF's. Also, SLV trades 16 million shares a day, so buying even, say, $100k- $200k of SLY, if done carefully, can be done without moving the price sharply higher.

Here are the facts on the stock price, which came from Yahoo Finance (finance.yahoo.com):

On 3/11/20, SLV closed at $15.63 with 26 million shares traded (let's call that Day 1)
Day 2: $14.62
Day 3: $13.69
Day 4: $12.00
Day 5: $11.88
Day 6: $11.21 (the bottom that day was $10.86)

Note that on Days 2-6 above the volume was over 55 million each day (vs. 26 million the day before the situation exploded).

So, with more than double the volume on days 2-6 and with the price going down sharply each day, you can pretty safely say there was some panic selling going on.

Now fast forward to August 10, about 5 months later. SLV hit $27.39 a share, up a whopping 152.2% from the $10.86 low of day 6. That is a HUGE move. Even if I got only half of that, I'd be extremely pleased.

Why do I mention this almost four years later? Because I remember that when COVID occurred, there had never really been anything quite like it before. I want to be prepared for when the next similar situation occurs. Almost certainly, there will be many people (fear mongers) out there who will say how the next situation will be much worse than what happened in 2020.

I don't expect the percentages next time to be as dramatic as last time, but I still expect there will be opportunity. If there was another COVID situation, I'd likely move quickly to sell short things like the cruise industry stocks, which got walloped last time and likely would again. Keep in mind that cruise ships aren't a necessity, but silver is! After shorting Carnival (CCL) and/or Royal Caribbean (RCL), I'd look quickly to buy SLV- giving the panic selling a week or two to occur.

I'm gonna add one more thing. When things get really wild, you don't have to necessarily wait for the stock market to open. There is a pre-market session and an after hours session. Extended hours trading is more like the Wild Wild West vs. modern civilization. That said, if you are really convinced something will be up 20% tomorrow and you can buy it in after hours today or pre-market tomorrow for perhaps 8-10% more than what it closed at, why not? Before doing any actual trading in extended hours, spend some time studying about it to see how it is different. For instance, there are no market orders allowed in extended hours- only limit orders to buy at a specific price can be used, at least at my brokerage firm.

Extended hours trading goes from 7am-9:25am EST and from 4:05-8pm EST at my brokerage firm (Schwab). Some firms might potentially have longer extended hours sessions. Regular market hours are 9:30-4pm EST.

I'm curious what others think about this as a strategy. Also, who can remember how long their local coin shops were closed during COVID? I fully realize that you could have bought on eBay even if your coin shop was closed. But why not trade the ETF where the difference between wholesale and retail is 1-2 cents per share and there is no commission instead of, say, the 15-25% markup charged by dealers.

[pmbug]

It's hard to draw conclusions from just a few data points. Case in point:

...
What happened next was one of the swiftest and deepest sell-offs in the history of global markets. On March 12, bitcoin prices plunged 39% in a single day, eventually hitting a low of $3,850.

With stocks and bonds also in upheaval, global authorities swung into action – determined to keep the financial system from freezing up, since such a calamity might deepen the economic damage or further impair confidence among investors, business executives and households. Primarily, the response came in the form of trillions of dollars of stimulus pumped into markets by the Federal Reserve, European Central Bank, Bank of Japan and authorities around the world.

As intended, asset prices came roaring back. And so did bitcoin. By the end of April, the cryptocurrency had more than doubled to about $8,600.
...

https://www.coindesk.com/markets/2020/1 ... -happened/

[Recyclersteve]

FYI- the link posted by pmbug above is a link which discusses the initial selloff and later adoption of crypto during 2020.

[Cu Penny Hoarder]

Nobody knew what was going to happen then. The MSM fear mongering made it seem like the entire world was going to die of covid. Right after the MSM started their doom and gloom, I began shorting the ES in mid Feb 2020. Was very hard to stay with the position, a few sleepless nights, but I did it. I closed the position during the first week in March. That was the most money I ever made trading the market in the shortest amount of time. I didn't worry about trying to catch a falling stock market knife, instead I used this opportunity to load up on physical 90%. On March 16th silver took a huge dive. I took 50% of the cash I made shorting and cleaned Apmex out of all their $100FV bags. Silver was $12.30oz at that time. Literally a few hours after I bought the premiums started ramping up.

Guess I could've done better by buying something else, but I wanted more silver. I've bought no more since then, totally happy with what I have now.

Timing really is everything.

[Recyclersteve]

Nobody knew what was going to happen then. The MSM fear mongering made it seem like the entire world was going to die of covid. Right after the MSM started their doom and gloom, I began shorting the ES in mid Feb 2020. Was very hard to stay with the position, a few sleepless nights, but I did it. I closed the position during the first week in March. That was the most money I ever made trading the market in the shortest amount of time. I didn't worry about trying to catch a falling stock market knife, instead I used this opportunity to load up on physical 90%. On March 16th silver took a huge dive. I took 50% of the cash I made shorting and cleaned Apmex out of all their $100FV bags. Silver was $12.30oz at that time. Literally a few hours after I bought the premiums started ramping up.

Guess I could've done better by buying something else, but I wanted more silver. I've bought no more since then, totally happy with what I have now.

Timing really is everything.

What is ES? I’m assuming you are not referring to Eversource Energy, a Massachusetts based utility which trades under the symbol ES.

[thecrazyone]

I knew cruise and flight stocks would drop so I bought those.

[Cu Penny Hoarder]

Nobody knew what was going to happen then. The MSM fear mongering made it seem like the entire world was going to die of covid. Right after the MSM started their doom and gloom, I began shorting the ES in mid Feb 2020. Was very hard to stay with the position, a few sleepless nights, but I did it. I closed the position during the first week in March. That was the most money I ever made trading the market in the shortest amount of time. I didn't worry about trying to catch a falling stock market knife, instead I used this opportunity to load up on physical 90%. On March 16th silver took a huge dive. I took 50% of the cash I made shorting and cleaned Apmex out of all their $100FV bags. Silver was $12.30oz at that time. Literally a few hours after I bought the premiums started ramping up.

Guess I could've done better by buying something else, but I wanted more silver. I've bought no more since then, totally happy with what I have now.

Timing really is everything.

What is ES? I’m assuming you are not referring to Eversource Energy, a Massachusetts based utility which trades under the symbol ES.

ES futures contracts. It tracks the S&P. It's margin trading, but I never use a lot of margin when taking a position.

I only trade futures instruments, better liquidity, flexibility and much better tax treatment.

[Recyclersteve]

I knew cruise and flight stocks would drop so I bought those.

Here is the tricky part. Let’s say you have an airline that is losing $, which happens pretty frequently when fuel costs are high. Let’s assume they are unprofitable on every flight. COVID comes along. They cancel a bunch of flights. The good news for them is that they are far less unprofitable than before. A potential buyer of their stock might also realize that those who influence the price of oil will realize they need to reduce the price to stimulate the weak economy. Also good news for the airline. So I’d consider buying an airline with modest losses.

However, one with big losses like Spirit Air (Ticker: SAVE) may have losses so big that bankruptcy is on the horizon no matter what. (FYI- Jet Blue was trying to buy Spirit until recently when the merger was blocked due to concerns about lack of competition. Even Joe Biden himself spoke out against it.)

So I am betting that Spirit will go the way of the dodo bird.

[pmbug]

FYI- the link posted by pmbug above is a link which discusses the initial selloff and later adoption of crypto during 2020.

I thought that was obvious from the bit that I quoted. Anyway the point was that the price action for bitcoin/crypto was very similar to what you observed with SLV for roughly the same time period.

[JerrySpringer]

That very short window of time in 2020, from late February to April, was an effed up time and I bet most people were worrying about everything but stocks. My workplace went into skeleton crew mode. I remember my partner getting angry at me for buying stocks in that time frame too, lol. Looking back, it really is a blood in the streets mood where you can get stuff at discounts.

I bought PSLV in prior years to now and still watching it bob up and down. I am averse to getting physical silver too right now as I just seeing it stigmatized with the huge buy/sell premium spread. Been more a fan of the common pre-zinc Lincoln cents at this point if I want to stack. In the coming decades it probably will be a hail mary attempt at saving some federal spending, but I see the 1 cent coin being stopped in production.

[68Camaro]

Hindsight is 20-20 and yes it was a messed up time; the palpable fear that existed is easy to dismiss from the safety of now. But I did jump on the silver drop (as noted in several other threads) along with CPH, and I also cautiously bought the SandP when it was down, and put in some limit orders for Ford and Carnival at prices that were so low that they never got to those levels (so no deal, guess I was too greedy). Sold the SandP too soon (in hindsight), though with a healthy profit.