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johnnyeagleeye

Junior Member
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Posts: 23
Reply with quote  #16 
Well, Mr. Ag, I have joined your forum. Seems like I have been barred from the BD forum. I posted a new topic on the BD forum last night challenging Mr. McAllister to come clean and tell his clients about his new business plan. I pointed out to him that he was dealing with sophisticated clients who would not be afraid to drop the legal hammer on him if there has been wrongdoing. Guess what, my post wasn't there tonight! It means that he or his lawyer are spending time screening what they allow to appear. In any event, if any of you have a viable legal strategy with some chance of success, I would be happy to hear about it. I have already filed complaints with the Austin BBB and the Texas AG. Don't expect much satisfaction from those entities. I will be out $12,000.
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FarmHand357

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Reply with quote  #17 
Firstly, much appreciation to JG for creating this forum and monitoring the Bullion Direct situation.  I've learned a lot and wish I had this information earlier this year.

Here's what I can't figure out:  In multiple purchases since 2010, I assumed that the price for buying or selling on the BD web site includes a built-in commission so that, when an order to do either is placed, BD can immediately contract for the appropriate amount of metal from a wholesale supplier and, having locked in both the buying and selling price, they've made a small amount of profit.  Whether buying or selling, they make money on the trade.  As long as they don't get greedy and attempt to time the future market, they make money on every trade.  Given this, how can their business model fail like this?  Did someone try to game the system and lose?
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johnnyeagleeye

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Reply with quote  #18 
Suspect G&A, Greed and Avarice. Maybe he used our cash to bet on gold futures, and guessed the wrong way. Someday we will find out.
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JG

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Posts: 991
Reply with quote  #19 
Quote:
Originally Posted by FarmHand357
Here's what I can't figure out:  In multiple purchases since 2010, I assumed that the price for buying or selling on the BD web site includes a built-in commission so that, when an order to do either is placed, BD can immediately contract for the appropriate amount of metal from a wholesale supplier and, having locked in both the buying and selling price, they've made a small amount of profit.  Whether buying or selling, they make money on the trade.  As long as they don't get greedy and attempt to time the future market, they make money on every trade.  Given this, how can their business model fail like this?  Did someone try to game the system and lose?


That's one of the big unknowns. With Tulving, he operates on a spread (e.g. buying silver at spot + $.20, selling at spot+$1.20; you get $1/oz to cover your expenses), and presumably if expenses went up the spread would widen. The business model fails when the numbers do not add up for some reason.

There was at least one case (not well known) where a bullion dealer was encouraged to "play the market" by a bullion wholesaler who offered forward contracts (like futures contracts), and lost a ton of money. So something like that is always possible, especially where the system allowed for using customers' metal.

Or it could simply be that expenses exceeded income, and that the 1% commission wasn't enough to cover all the expenses.

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tboll

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Reply with quote  #20 
So what does "in stock" mean on catalog items if he didn't already own them or have them in his possession?  If he already did have them, then they must have been purchased at whatever price the metal was at that time and not necessarily the as low as the current spot price.  So the in-stock items are the ones that I could see him losing on.  Maybe the in-stock items were whatever he was storing in the vault for customers.  If that is the case, and he couldn't replace them immediately (due to some supply interruption) then maybe he starting floating himself "loans" and figured he would replace them later, when the price dropped again.  All speculation but just an attempt to understand what "in stock" meant and how he could be sure to sell at a profit if he had already bought the metal in advance.
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JG

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Reply with quote  #21 
Quote:
Originally Posted by tboll
So what does "in stock" mean on catalog items if he didn't already own them or have them in his possession?


That is a very good question.

Looking right now, it shows 5 crates of 500 1oz gold buffalo coins as "available". That's $3M worth. Why 5? If there is an inventory system in place, there may (should?) be $3M of gold sitting in the vault in Delaware. That's 2,500oz of gold that could be "stored" for customers (e.g. one person has 10 1/10oz gold eagles listed in their account, another has 3 1oz Krugerrands listed in their account, etc.).

And if something is listed as "in stock", and it is indeed sitting in a vault in Texas or Delaware, how come it could not get delivered in a reasonable timeframe?

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shannon

Junior Member
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Posts: 27
Reply with quote  #22 
Quote:
Originally Posted by JG

And if something is listed as "in stock", and it is indeed sitting in a vault in Texas or Delaware, how come it could not get delivered in a reasonable timeframe?


At this point I couldn't care less about how the gold is minted.  I'd be jumping for joy to accept 12 one-once bars instead of my American Eagles if he has the inventory in his vault.
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