% | $
Quotes you view appear here for quick access.

Silver Wheaton Corp. Message Board

  • silent_cries55 silent_cries55 Jan 18, 2009 11:25 PM Flag

    Need Advice!

    I borrowed 145k to buy gold stocks last spring. (95k on credit cards plus 50k on my home equity loan). My break even point is 145k on this borrowed money, which is split evenly between AUY, KGC, and SLW. The 0% interest on two of the credit cards (65k) ends next month. I will then start paying 11-12%. The third card (30k) has 0% until Sept 2009. This Ameritrade account (not IRA) was down to 55k in November, but has recovered back to 103k as of Friday….break even is 145k.

    I was denied on a house refinance application last week due to my excessive ccard debt to income ratio. My plan was to combine the home equity line with my primary mortgage all into one new loan at a lower 30 year fixed rate. The home equity interest will go up. I also found out this credit card debt has caused my credit score to drop from 780 to 720 over the past year. Although I have never missed or made any late payments. They said it’s dropping because I have a ccard debt to income ratio of 150%, and the credit report cannot see the money in my Ameritrade account.

    Nevertheless, I’m thinking about borrowing 30k on margin to pay off some of the credit cards due next month. This should prevent my credit score from dropping further as Ameritrade does not report margin debt to the credit bureau. Additionally, my ccard debt to income ratio would drop far enough for me to refinance my house.

    However, I have never used margin and do not know the rules or limits on margin calls.
    If I borrowed 30k on margin and my account is currently worth 100k, how much would my account value need to drop before I get a margin call? Also, the guy said if I sell a security the money first goes to pay back the loan, but I would still get some funds available to trade? Please explain this and any other implications/risks with a margin account. The guy at Ameritrade was not very helpful explaining how it works.

    I am confident the gold stocks will recover another 40% for me to break even. However, it could take a long time and I will be paying interest. Here are the options I have considered. I am not sure what to do! Let me know what you think. Any help would be greatly appreciated.

    1. Keep all the stock. Borrow 30k on margin….pay part of the credit cards. This will allow me to refinance my house, and stop my credit score from dropping. Although I will be paying interest on the margin and remaining ccard debt.

    2. Sell enough stock to pay back the 65k of credit card debt, which will start accumulating interest next month. This will lock in some big losses, but prevent any ccard interest charges. In addition, my credit score would start climbing back to 780. Let the remaining 37k ride as the 3rd ccard not due until September.

    3. Sell enough stock (30k) to allow me to refinance and stop my credit score from dropping. Let 65k ride on the stocks. I would start paying interest on 35k next month with this option.

    4. Sell my physical gold and silver (about 22k) to pay some credit card debt. Sell some stock as in options 2 and 3 listed above. I am not sure if I should be holding physical while paying 10-11% interest. I don't want to sell it though!

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • shoot yourself, you stupid idiot. Never Never gamble more than you have.

    • Dude you got moxy! The urban dictionary defines moxy as: n. When someone has guts or balls, they have moxy.

      That's more than most of the other ten cent millionaires here have. A lot of people just can't pass up the chance to kick a guy when he's down.

      Selling short term covered calls could certainly help lighten the load if you're wanting to hang on to all your positions in each of these stocks (which is what I'd be trying like he11 to do). You don't say in your post, but assuming you bought most of these stocks around May of 2008, you must have about 200 to 300 shares of each. I checked out what the bid was on the FEB09 calls for each of these stocks at a strike price that was at a strike price that is 10% to 25% above each of the stocks current price. That would generate you about $450 every 30 days to go toward what will be your monthly debt service of approximately $1300 (figure based on $145000 at 11% annual interest).

      This strategy might buy you some more time as you wait for that inevitable depression and inflation that most of here know is coming.

      Whatever you decide to do.... by all means KEEP THE MOXY! The greatest hazard in life is to risk nothing, 'cause that exactly what you'll have when you get to the end of it... NOTHING!

    • sell covered calls on your stock to make your payments

    • sell into strength and pay off your debt. Don't worry about it. even the smart jews lost all their money in a ponzi scheme

    • First, I would agree with others, stay away from margin, it can destroy you. Secondly, although he was not too kind with his words "yourdeadmeat" has a good suggestion in writing covered calls. I am no expert but I have a rough idea on how it can work. Actually, if you can convince deadmeat to help he understands the option selling well.

      Here is a hypothetical example. It will also help if you can be successful with selling at an intermediate top. Let's assume that SLW is getting ready for a strong breakout move as a continuation pattern of the current bullish pennant pattern occurring on the daily chart. Two weeks from now it hits $9/share and looks to be stalling. At that time you sell some covered calls on the shares you own, something like a $10 call that generates $2/share income. This provides cash into your account that helps pay the credit cards yet allows you to possibly keep your shares. If by the time the option expires the price is below $10/share you get to keep the cash you earned and your shares. If the price is above $10/share you will lose your shares but will have essentially sold them for $11/share thus hopefully getting closer to your breakeven point. Then, hopefully on a future pullback you can rebuy your shares cheaper. The risk is the price just keeps going up and you lose your shares and the chance to gain from a big move. This is probably unlikely.

      If things go well and you do not lose your shares you can repeat the process, continually earning income to pay the credit card while keeping your shares for the long haul.

      I believe this could be a good strategy for you to get out of your mess, the key is either knowing how to use options or learning quickly.

      Don't let the people who give you a hard time get you down. We all make mistakes and in this crazy world a sensible person should go to extreme measures to protect themselves with gold and silver. Problem is, it is also a corrupt world and good sense and logic don't seem to working that well right now.

      Good luck!

      • 2 Replies to ballhead59
      • I don't know anything about options so I would have to learn it fast. Although I will start paying interest next month on 65k of ccard debt, my monthly payments will not increase.

        Currently all payments go to principle only. Starting Feb 7th they will go to P & I. Therefore, I would be able to continue paying my current payment and keep the stocks if I choose to do so.

        I'll have to start researching options. In the mean time, I was thinking of borrowing 20k of my 100k balance on margin to pay off one card and help my credit score. I would have 80% equity in the account. I think my stocks would have to drop by over 60% to get a margin call. Hmmmm. Thx guys.

      • good explanation ballhead!

    • You have approx 2000 shares of KGC, 5000 shares of SLW anad 4000 shares of AUY. Assuming this is close - this is what I would do:

      Sell the Jan 2011 10 strike calls on 4000 AUY for approx $2.50 or $10,000. Sell the Jan 2011 20 strike calls on KGC for $5.20 or $10,400. Keep the slw. Take the $20 grand and pay down the credit card debt. Then wait for a pop to $12 on SLW and sell 3500 shares for $42,000 and pay off the credit card debt (This fall or earlier) This will get your interest rate credit cards to zero. The other stocks will be called away from you in January 2011 for $40,000 (KGC) plus $40,000 (AUY) and you will have 1500 shares of slw to show for your gambling to pay the interest until 2011. You will break even if slw goes to $12.....

      You could hold for a little while longer and get more premium for the calls...

      • 2 Replies to rematter
      • This sounds like a nice option to recoup the losses. However, I'm not sure I want to be locked down holding the stock until 2011.

        I was hoping for a pop this spring to cash out 65k and pay off the two ccards due next month. Paying that down would also dramitcally improve my credit report.

        I will most likely need to decide between taking a loss now, or using your strategy to try and recoup all of my the expense of remaining severely overextended on ccards and paying interest. Thx for the plan. I applied for an options upgrade today.

      • Hey Silent_Cries,

        As I said, I am no expert, but this post from rematter sounds like a professional who knows options. At the very least, it should be a good starting point. Nice post rematter!

    • Hold for a double in your stock shares about six months, take the hit on interest for your stocks will appreciate faster than interest. Sell at the nearest top and payoff what you can. Hold your physical gold. Dont worry about refinancing until your accounts are straightened out. You only need another 45k and which is another 45% or so. This will be achieved soon with these stocks. If they were any other stocks I would say do what it takes to payoff interest debt. But these should do well MR.

    • I would never mess with margin. As far as gold and silver stocks in general, I think they will be in a trading range. I dont see inflation as a major issue for the next year. I do see banks stabilizing within a few months.

    • Sell the stocks, buy physical, bury it and file BK.

    • I am amused. It is people like you who force the rest of us to subsidize the nationalist move to prop up banks going bankrupt. DO NOT borrow more money. Focus on liquidating whatever stocks you have to to save your house. Take the pain; write off your losses. Then, meditate on NOT perpetrating the same behavior again. Let your house be your primary investment until you get your gambling problem under control. You appear to be in a fix that you will NOT be able to win by borrowing more money. Also, BE THANKFUL that you don't have MORE losses than you actually do. Considering the risk that you took, you have done better than most, and have NOT lost nearly as much as you potentially could have.

    • View More Messages
18.84+0.06(+0.32%)May 26 4:02 PMEDT