WEEK 40.1 PERMANENT Price War
Recently precious metal price war in SLS facebook is very fierce and killed off many of the reseller. Now, it remains a question whether it will be a permanent thing or just a one time kill.
Well, let do some computation to justify this claim. Assume someone managed to get a loan of RM100K to do this precious metal business. Normally GLC and government staffs are entitled to get a lower interest personal loan. The effective interest rate for such loan is around 10% per annum.
For the ease of calculation, let assume the following
Loan amount : RM100,000/=
Interest rate: 10% or RM10,000/- per year.
Silver price :- RM100/oz
Nett Profit margin before interest cost : 3.33% (dump prices)
Assume, price is stable around USD29 – 32/oz
So at RM100,000/= he will be able to source 1000 oz for sales. So, he needs to sell 3000 oz per year just to recover his interest margin. Can the market absorb 3000 oz per year?
Let assume there are 10 persons following his footstep, the total loan amount is RM1 million and 30,000 oz of silver per year sales is required to cover the interest cost. Thus, a 3-10x increase in existing customer base is required to support this business expansion.
Thus, be prepared for permanent price war. It’s just the beginning. Nevertheless, it’s an opportunity for everyone to make $$ and losses some as well.
10% interest too high, is a dangerous game. Never ever a good idea to borrow heavily like this to invest, worst start a price war. Price war means short selling silver market, never a good thing for seller, and buyer too because they cant let go profitably. This will end badly and someone going to lose a lot. Furthermore a bold prediction i think silver price is likely going south in fire year 2012 to 2013. Fire melts metal. Take care everyone, silver still good but some bad ppl going to do some bad things to f--- us all. Who can tahan 2 years will emerge winner.
ReplyDeleteOnly easy money encourages people to take 10% interest loan to make 3% profit hehe personally make no biz sense to me.
ReplyDelete3% per sales my friend. if he can make 10 sales 1 year then it's 30% - 105, he still got 20% out of 100,000 that is RM20,000 wow. seems to be a good deal.
ReplyDeletewah selling silver really tough, aiming 3% margin, then make 10 rounds ... no longer is easy money business. Need to do it full time and do it very very fast and efficient, and need to ensure supply chain doesnt screw up.
ReplyDelete