Fractional Silver When Ounces Matter More

Today's guest on The Silver Investing Presentation Series is Bill Ayers!

S1

In this episode, we discussed: 

  • Insight on the market dynamics
  • Bill's unique process and approach to business
  • The growing pains in a bull market.
  • The Role(s) of Fractional silver in a PM portfolio.
  • Boots on the ground silver community insights..

 

 

Transcript:

Jeff: Hey guys, it's Jeff here. I am with Bill Ayers once again. I interviewed Bill a few months ago about his new venture which is going really well. We've had a chance to touch base a couple of times over the last few weeks and stay in touch about what's happening with the process.

Bill is actually a neighbor of mine, and so this is really easy for us to do. It just so happens that he is pouring these unbelievable tiny little molds that make a beautiful Per Diem coin, a Per Diem coin. That's actually the name. Per Diem Metal is the name of his website and his business. We're here to catch up on how things have evolved since the last time we talked.

If you'll remember ... We'll have a link to the first podcast some place below the video. Last time, we went through a little bit what the process is. Today, I'd like to hear more about from you, Bill, what's changed for you. What the business has been like. A little bit maybe about how the market has evolved, to give people an idea of how this fits in the overall precious metals space.

It's very interesting to me because not only do these Per Diem coins represent a story of wealth, but they are also a potential currency. One that can be used very easily and answers many of the objections that all of us have around crisis, events or situations where bartering with even a once ounce coin might be something to avoid.

These are much smaller. They certainly are in a way an answer to that primary objection and concern that people have. Even though many people don't really want to go there as far as imagining using these coins as barter. I think that's going to change and we'll talk a little bit about that.

Without further ado, Bill, thank you for being here, for being in my home actually. Tell us what's happening and what's new since last time.

Bill: Wow! Let's give a little bit of a review for the people that might be hearing this first. What I do is I make one-tenth troy ounce silver rounds. They're not the minted stamp that you would get from a bigger business or from the treasury or anything like that. I call it hand-cast rather than hand-poured. You can find a lot of hand-poured things online where people melt down the metal and pour it into a mold. Mine is melted in the mold through a kiln system and then stamped afterwards. They're one-tenth ounce, 999 silver rounds.

Last time we spoke I just finished up the first round of tooling to create the manufacturing process to start producing more than just one or two at a time. Since then, we did the podcast, my YouTube channel is up and I'm starting to populate it with content, and I had a real explosion of orders. I also work through a couple of silver forums and people from there ordered also.

The demand had me going six, seven days a week, 10 hours a day and basically destroyed all my processes. Which is great. Having been an entrepreneur, this is what you want. You want to push the limits. Have it break and fix it. I don't see it as fragile. I see it as anti-fragile. Everything that broke, I made it three times as strong. Everything that gets disturbed, I make better.

Let me think. The first one was ... God. Which system I want to talk about? The kiln. I said last time, I made my kiln which it's one of those things that looking ... I catch myself all the time, like, "Oh! I shouldn't have done that. I should have just bought one." I didn't even know this process would work. That was a learning process.

I also remember when I got ... I finally just burned out my old kiln to the point where it wasn't worth repairing. It really was being held together with wire and craziness. We can throw some pictures up. When it burned out finally I said, "I'm done." I had researched and bought a really nice kiln made for those type of thing.

Put it together, I was so thankful I built my own, because when I got the kiln I realized how awesome this was and why it was good and what I needed to do to make sure it did its job perfectly. I would not have known that. I would have been completely clueless about the kiln. That was a huge deal.


This kiln is four or five times the floor surface and eight times the volume. I don't need the volume because I just do one mold at a time, but the floor surface. I had a mold system made of graphite that was three by six inches, and now I use a seven by seven. Rather than doing 24 at a time, I do 72 at a time. Which creates its own issues, because now you have this much, eight times the density and mass that has to be heated, or four times basically. Yeah, four times. It's thicker too. It's a little bit more than that.

That doesn't just take four times. It takes six times or eight time amount of time to heat that up. Once you have the kiln hot, then ... One think I found out with this is when I do a casting day, I'm doing eight hours of it because the first one takes three hours. The second one takes an hour and a half. The third one takes an hour and 15 minute, and I can get it down to about an hour and five. That's another thing I've learned.

Having this huge graphite plate that ... I haven't weighed it, but it has to weight five, six pounds and then you have ... What is it? 72, 7.2 ounces. Then another half a pound of silver and you heat it up to 1850 degrees, and then you take that out the kiln. You have 7, 8 pounds of this glowing red material. That's a whole another process. Different gloves. Different clams or pliers or what you set it on. I went through that whole process.

I am now at the point where I have reached the new level ... And then there's the stamps. I was hand stamping them one by one and I can't tell you how many times I hit my thumb with a hammer. Anyone that does this type of thing knows that it's just nerve wrecking and doing a hundred straight, by the end you're just sweating because you have to super attention. I bought a press. What are they called? An arbor press and I bought a one ton press that I put my stamps in and press it down like an [olive 00:08:26] press or something like that. If you get that image in your head. Maybe you can put a picture up of one.

It wasn't stamping them well enough, and so I bought a larger handle, a three foot handle to put in it and I broke the press. This massive cast iron piece of machinery, I broke in half. I'm in the process of having these massive rush of orders and all of these things are breaking and I'm just flipping out just trying to keep up and keep customers satisfied. Luckily, I was able to do all that.

I just spent the money and bought a three ton press. This thing is huge. It totally surprised me. It's like 80 pounds. One thing I learned was if one ton breaks, two tons would probably work, three tons will for sure. I spent 50% more money on a three ton press than it would cost a two ton, but I don't have to worry about it. This isn't massive amounts. We're talking $200 or $300. I can go on and on.

These are the types of things I think are interesting to think about for people that are wanting to do their own businesses. Don't think that, "Oh! This broke. It's screwed up." No. This is ... Once again, like I said last time. This is where someone else got frustrating quick. This is where I learned and made it better.

In this market, I don't want to compete with other people. I don't want to do what other people are doing. I want to find my own unique place and dominate it. In the small coins that I'm finding a lot of challenges, which is excellent. As a business, I want tons of challenges that I learn how to overcome. That makes it more valuable.

Now, that said, we can talk about the business [inaudible 00:10:27]. One of the assumptions that we talked about last time that I was going to test was is this is a viable business? After we had posted the interview and I had put YouTube videos up, I got an explosion of orders, thousands, and scrambled to keep up and went through the whole process I told you about.

One thing I did is because I was working six, seven days a week, 10 hours a day, I was not marketing. I was not putting up videos other than a couple. I wasn't doing podcast. Somewhat purposely and somewhat because I didn't have the bandwidth. That the marketing noise or whatever you you want to call it quieted down and sales tapered off. Right now, I'm gearing that back up.

The next question is, did I find the handful of people in the world that want it? That's it. It'd done. Was this just a sample of a small portion of the community I can connect with? A couple of things I'm doing. I'm talking with distributors, APMEX, Provident, Yeager's Poured Silver. I have two, three ... Two companies are [caring 00:11:51] already. I have conversations with three other going. Thinking about maybe I just want to set up a distribution system where I manufacture and that's it. I don't know. These are the questions I have to find out.

Jeff: You've had a chance to, with the influx, that first round of customers. One thing that we talked about was how ... It's this unintended or unexpected benefit of working in these communities is that you meet and you engage with people who are like us and who understand the economics, they understand the monetary issues, and here they are. They're really interested in this stuff and we get to know who they are.

As you alluded, you're finding out, are you just talking to a very small segment of the community or are you talking to part of the community that's representative of the larger community? What has been your experience as you've ... And gotten to, who are these people? Who are we?

Bill: Right. The people that have purchased the Per Diems I think are a mix of course. They're almost entirely, entirely guys. Kim, my partner, she said, "Are there any women that order these?" I'm like, "Well, not many so far." Which is interesting. I'm not really sure why, but it doesn't matter.

The mass majority so far that I've seen are collectors. These guy are people who call themselves stackers. Are proud of their cool interesting pieces, and least publicly, seem to collect for the fun and the uniqueness of the collection. Just like when you're a kid, you collected coins or whatever, or stamps or something like that. Which I find really interesting, because that is not all why I got into silver to begin with.

There are a couple, I know for sure, that are acquiring silver to acquire silver as wealth. I have a guy in Canada that's ordered multiple times, which is another interesting thing. I have people that have ordered multiple times, which is a great sign for for any business. I'm looking how to cater to that group.

This guy, every time he gets a pension check, he orders Per Diems, which I find interesting if you understand what's going on in Canada right now. They are hitting the edges of hyperinflation. Gold and silver are approaching all-time highs I believe. Their food prices are increasing every week and month. They don't want to stay in their currency.

This is already happening. These things that here in America we've been talking about and around the world, "Oh! There's going to be hyperinflation." Blah-blah-blah. People say, "Oh! It's never going to happen." It's happening. There's a guy in Australia that's doing the same thing.

These are first world developed countries, and they're in it. It's happening. It's not just Venezuela right now, which is total basket case. That's real hyperinflation.

Jeff: These coins really do answer the question or the objection to fractional as a subset of coins that you can buy. Fractional coins typically have a higher premium and so they're not as accessible. They're not made in the same volume or mass quantities.

We're talking about reasons why someone who might be concerned about economic or financial events that are turning over would say, "This is a store of wealth." That's one rational. It's also potentially a currency. Potentially, it's a convenient way of bartering or transacting, and there's a difference.

Bill: Absolutely. There are lots of arguments about that. Right now, the majority of the world does not have a need for fractional silver to use as a currency. I believe ... How should I approach this? Say, there's someone that wants to hold their wealth in precious metals. Think about what allocation you want that. Not just gold versus silver, which is important, or the percentage of your wealth you want to put in precious metals. That's a personal decision.

Then, in say ... You figured out how much silver you want. Then what denominations? I have 10 ounce bars. I have silver eagles. I have generic rounds, and i have fractionals. I think that is why it's for me to have this array of different quantities because I do different things and in different situations.

I decided a long time ago I want X-amount of ounces minimum and I want a percentage of that to be silver eagles because they're recognized around the world and they are not just maybe more difficult to fake, but there's a lot more laws involved. You counterfeit a federal coin, that's different than making a [inaudible 00:17:41] round covered in silver with copper in the middle. Completely different. Different consequences.

I have a percentage of that, and then I have pre-65 coins and now I want 999 silver too. I have a percentage. That's how I would tell people to look at it. I'm not saying, "Oh, yeah. You want to turn all of your silver in fractionals." I think that would be silly and really expensive. I think it might be wise to consider a portion of our holdings in fractionals for different reasons. If you want to get rid of some or there's another crunch, like last summer on fractionals, on pre-65 coins. It's more volatile for sure.

I don't think it's going to go back down the spot again. Pre-65 coins a handful of years ago, you could buy a spot. I think those days are gone.

Jeff: Yeah, it seems that way.

Bill: Anyway, that's my take on holdings.

Jeff: Cool. Yeah, it is. In a way it's, like you say, I think it's a perfect analogy if you look at your whole portfolio and you are allocating some portion. There's a range. Some people have a small allocation. Within that allocation it's a further level of diversification. It's fun in one sense but it's also irrational because it's like your earthquake kit. It's good enough in a way to have water and food, but something that you could transact with or go beyond that maybe with medicine or go beyond that with things that you really want to have and if you don't have access to a store for a week or more.

Bill: Right. In my dash bag, we have ... I have a gold coin. That's bulk. What the heck am I going to do with that if I do need to buy food? Then have a handful of fractional. If we do go through this transition as heavily or as extremely as some people believe, if the dollar goes away, all governance and all those systems go away. All of them.

I think the biggest risk is not even that. It's the debt based system we have. What I mean by that? Not the monetary system. I mean the distribution system. A perfect example is the guy who drives the truck to deliver your food pays with a debit card to get gas. If you can't do that, he can't deliver your food. That is debt based. That is not real currency. If that debt based system implodes, then who knows what's going to happen? I don't want to preach fear. This is being prepared for an earthquake.

Jeff: Just to reiterate that it's either you really ... You're at the stage where you are the minimum viable production and you're looked at maybe distribution. You're getting your procedures down. You know how to do it. You've learned how to handle things without blowing yourself up or burning down the buildings or the neighborhood.

From a business standpoint, you're doing well. You're doing it. This is profitable and you're looking at the next stage.

Bill: The next question is still, is viable for me. The system is profitable. The question is will people be interested at the level that can make it a sustainable business? That's the next question. That's why I'm looking at distributors and looking at cranking up the marketing more. Connecting more people. Building up a community on YouTube and really looking at the people that love these.

I'm going to rave comments on these. These are amazing. Never seen anything like them. Those are people. I don't connect with them. Tell me more. Thank you so much. Gathering that group of super fans and seeing how I can cater to them overtime. Whether it's different products or different packaging. Maybe a little treasure chest. I don't what. A nice leather bag. Some people will say, "Oh! I need more of these. My leather pouch isn't filled yet. They literally walk around with them in their leather pouch in their belt, which I think is cool. That's the next step.

It's still not a viable business and scale and it may never be ... I think there's tons of potential to find out.

Jeff: We all appreciate your sharing the what's going into ... What behind the scenes and how it is evolving like a business. I'm sure you as I am always open to and welcome suggestions of feedback or ideas. The same people who are interested or who are a part of this small niche that we're involved in care passionately as we do. That's one of the other hidden benefits from pursuing a business in this space is that you end up finding that people are really rooting for you and they want you to do well.

Bill: Yes. Absolutely.

Jeff: Yeah. Thank you Bill. I really appreciate that.

Bill: Thank you a ton.

Jeff: Yeah. Again, there'll be a place to share a feedback. You can get ... Let everyone know how the best way of getting in touch with you or finding you.

Bill: Great. It's simple. Go to perdiemmetals.com and check out the site, ir you can just e-mail me directly at contact@perdiemmetals.com. Even if you have comments, questions, whatever, I'd be happy to respond.

Jeff: Cool. Great. Thank you Bill and we look forward to chatting with you soon.

Bill: Great. Thanks.

Jeff: Okay.

Bill: Cool.

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