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shannon

Junior Member
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Posts: 27
Reply with quote  #1 
I thought I'd move this topic from BD user " over to this forum because I think it's interesting, and who knows how long the Bullion Direct forum will be online:

Quote:

I thought I'd open up a new topic to start thinking about what we did wrong and how we can avoid making the same mistakes in the future. About.Ag has posted several informative comments about dealers going out of business and the signs and symptoms of an impending bankruptcy. Seems that a lot of us will get burned if BD goes under - some only minor burns, but others may suffer major losses. At one time, Tulving looked like a fine, reputable gold dealer and so has BD. Were we deceived the whole time or might these companies have been flying high and then just hit an unexpected hurdle and made bad decisions which led to their downturn? It may not really matter if we didn't let ourselves become so dependent on the dealership.

I don't know about the rest of you, but at times I treated BD as though it were a gold "bank". I put money into it (to "purchase" gold) and then from time to time I sold the gold, via Nucleo, and converted my "virtual" gold to "virtual" cash. I would then leave the cash in the account to use for future gold purchase and subsequent sales. In a way, it was like anteing up in a poker game and letting everything ride and never cashing out. 

My take-homes from this experience are:
1. Purchase only small quantities of Precious Metals at one time and take delivery immediately. I realize that shipping costs will be higher, but risk of losing a lot of money is minimized.
2. Store your own gold or at least don't keep it in the possession of the entity that sold it to you. How do you know they even have or had the gold that they sold you?
3. And the third lesson that I learned is that similar to stocks, don't get complacent and start to feel that past performance has any bearing on future performance. I don't mean this with regards to Gold futures pricing, but more with regards to the stability of your gold dealer. Tulving and BD were not flash-in-the-pan companies. They were around doing business and selling gold for years. They even had very positive BBB ratings/reviews. So you have to keep your guard and suspicions up all the time.

Any advice or opinions that others can offer? I'm not really much of a gold investor so I don't know if my advice is all that useful or not obvious.


I think this is all good advice, and I don't disagree with anything said here.

I actually behaved this way when I first started buying and selling through bulliondirect  (BD) back in 2010-11.  I purchased my first gold coins back in 2006, and I was never really happy with the people I did business with (before I found BD, I actually used tulving for a few purchases).  Shipment was never as prompt as I would have liked.  The risks seemed too big.  When I finally found BD I thought I had found the individual gold investor promise land.  It was a great company.  I got instant order confirmations.  When I mailed in checks though my bill pay or sent in coins, I got prompt response that the delivery was made and my portfolio was updated.  Whenever I requested a check or product draw, I never waited for more than a few days (sometimes the same day) for the order to be filled and get tracking information.  They were actually pretty prompt the times I did contact them with questions through their website.

Being an individual investor, I bought or sold a very small number of coins at a time to balance my portfolio.  I did this about once every month or two.  I typically requested the product draw, and as stated above I was always happy with the service I received.  Over the years I began to build up a level of trust with BD and decided not to cash out on every transaction.  Paying ~$20 to have the gold shipped to me and having to take it to my safe deposit box only to have to go get it and ship it back a month later (another $20) to sell started to seem unnecessary.  I also started to question why I thought it was safer to store the gold at my house (it could burn down or get robbed) or even in a safe deposit box (the bank could be robbed or burn down and the contents of the box are uninsured).  I just assumed that a person in the business of running a web site like BD would have more resources invested in storing/protecting his metal.  I know all this may seem pretty silly now, but I just wanted to explain to others of how I became comfortable with and started to have a degree of trust with BD.

Fast forward to today --- I have 12 one-ounce Gold American Eagles left in my portfolio.   I made a product draw on May 4, and as is true with most users reading this forum I still don't have the coins.  This is about 2% of my net worth.  It won't destroy me or anything, but it's not pleasant for sure.  Now I really wish I had kept up my habits from 2010-11.

Perhaps another lesson for me might be to balance my portfolio less frequently (6-12 months) and incur whatever transaction fees are required to have the gold in hand.  Since there is a fixed cost element to each transaction, making fewer transactions will lower this hit.  Since I am investing for the long term, I don't think balancing the portfolio if all the buckets are withing 2-3% of each other makes a big difference.  I just thought it was fun to keep everything balanced.  

I expect we will all get some of what we are owed at some point, but I'm sure the process will be slow.  I suppose you could spin the fact that they have suspended operations in a positive light (trying to catch up on orders and what not), but I see this as a HUGE negative.  I'll keep an eye on the about.ag site to see how all this plays out.  It should be interesting at the very least.  We live and we learn.


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tboll

Senior Member
Registered:
Posts: 299
Reply with quote  #2 
I opted to move this thread over to here from the BD forum (reads oldest to newest)...

Do you know of other (any) examples of dealers of the size of Tulving or BD that have gone bankrupt and whether the customers have ever gotten anything back, at what rate (pennies on dollar) and how long it took before they received disbursement? I'm just wondering if having gold stored away at a dealership or storage provider is any more secure than owning shares of stock.
-- tboll

Bullion Direct and Tulving are very different than most other bullion dealers that had troubles. I've put together a list of bullion dealers that had issues at 
http://about.ag/GoldSilverFraud.htm . Lots and lots are pretty blatant fraud ("If you pay me $100K for $100K of gold, I'll buy it and store it for you, really I will!" type stuff). One of the closest to BD and Tulving was National Gold Exchange, which went went bankrupt after their bank made a surprise visit. But very few individuals were affected by that (I don't think they did mail order). Other than them, I am not aware of a prominent bullion dealer going bankrupt owing a lot of money.

With Tulving, at least the assets *may* cover much of what is owed (depending on things like how much more money the "professionals" like bankruptcy attorneys/accountants take out, and the true value of the seized coins). But Tulving didn't offer to store metal for people. So Bullion Direct is unique in that regard.

I am not aware of any depositories going bankrupt. And if they did, a real depository normally safeguards *your* goods -- meaning that it is crystal clear that you own the metal, they cannot do anything with it. And you pay them for that service. It is the only way they get paid, so they have to price it right. They may go bankrupt, but you aren't going to be a creditor, you will get your metal (unless there is blatant fraud).

So the real issue here is storing metal with a company based on trust (BD had a great reputation), rather than terms (which appear to have allowed BD to use the stored metal).
-- About.AG


Great to know that BD is a different beast than anything else and that we really have no precedence to know what is going to happen.  If when they open the vault it turns out to be empty, then all we've really purchased when from BD is "shares" of a potentially worthless company.
-- tboll
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BOB

Junior Member
Registered:
Posts: 21
Reply with quote  #3 
It's *%#$@*& frustrating that I didn't check the BD forums before placing my order in mid-May. It's even more frustrating that my check cleared on June 9, about a week before they suspended operations. Surely they understood at that point that there would be problems fulfilling my order in a timely manner, but cashed the check anyway. I had several catalog orders up to 2011 that went fine, so I just trusted that this one would too. If BD isn't holding my coins now, what happens when/if prices spike this fall? Thankfully, I decided to split my last order with Texas Precious Metals and had the coins in my hand in 8 days from order date (paid by check).
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