OT- Back in 2006 several of us on my trading board here at IHUB got into silver in the $10 to $12 range. I think it good to have some tucked away. Here is something Jim Brown of OptionInvestors.com wrote in 2012 about investing in silver for the long run. I know, i know...the greatest investment of the decade is FnF!!
Greatest Investment of the Decade
by Jim Brown
Silver rallied from a low of $8.40 an ounce in October 2008 to $49.82 in
April 2011. That is a whopping +493% gain in a little over two years. After
hitting that high in April the futures exchanges took it upon themselves to
halt speculation in silver. They raised the margin requirements five times
only days apart to "protect themselves" from the unwarranted speculation in
silver. They did a great job. Hedge funds and commodity funds were forced
to sell huge positions they had accumulated in anticipation of the coming
silver shortage. Yes, silver shortage.
Just because silver has traded in single digits for most of its life does not
mean it is overvalued today. After crashing from the nearly $50 peak in April
silver has been consolidating in the $30-$40 range. The high volatility in the
euro and the dollar has kept gold, silver and commodity traders off balance
for the last six months. The crash of MFGlobal did not help as tens of
thousands of open positions had to be closed and in many cases the funds
were not returned to the traders accounts. Those high volume commodity
traders were sidelined temporarily with many likely out of business for
months. If auditors can't find the $1.2 billion in customer funds that MF
Global used for corporate purposes those traders will only get a small portion
of their money back. These factors have forced a consolldation in silver and
gold they have not halted the future escalation in price.
There is a silver shortage headed our way. The majority of all the gold
ever mined is still sitting in the vaults of central banks and ETFsaround the
world. The amount used in jewelry and manufacturing is only a small
percentage. Gold has become a reserve currency, a storehouse of wealth
and a hedge against disaster. Unfortunately because the price has risen to
more than $1,700 an ounce it is no longer possible for the average person to
own gold.
If you have put some gold away for a rainy day and times really do get
bad then how would you spend it? If gold is $1700 an ounce today with a
decent economy then it could rise to $3,500-$5,000 if times became really
tough as in hyper inflation, depression, a run on the dollar or a sovereign
debt crisis in the United States. Don't think it can't happen. The U.S. has far
more debt than any other country in the world. With a $1.5 trillion deficit
each year our debt will exceed $20 trillion by 2020 and $30 trillion by 2025
when you add interest. That is just the debt the government will admit
having. The unfunded liabilities of Social Security, Medicare and Medicaid
represent another $80 trillion in debt that will come due as the 44 million
baby boomers begin retiring in this decade. There is not enough money to
ever payoff this debt.
You can't fix a debt problem by adding more debt. The only way to end
the problem is to payoff the debt, restructure it by defaulting on the bonds,
or inflate it away. That means creating enough inflation so the dollar
declines in value to the point where we are paying off debt using 25-cent
dollars. Since there is not enough money or physical earning capacity to
actually payoff the debt using real dollars that is not an option. The U.S. will
never default on its debt or it would risk not being able to sell more debt to
finance future generations so that is also not an option. The only option is to
artificially inflate the economy by continuing to print and inject more money
into the economy. This will produce inflation.
With the economy awash in a sea of Federal Reserve dollars the stock
market will rise, homes will rise, everything denominated in dollars will go
up. When inflated assets are sold the government collects taxes. Every time
a dollar changes hands the tax man collects his share. The more money
flowing through the economy the more times it changes hands and the more
taxes are generated. It is the ultimate get rich quick scheme. Turn on the
fire hose of money supply and collect a tax every time a dollar changes
hands.
Unfortunately everything you and I buy will cost more. Everything from
bread, cereal and coffee to cars, tires and homes. I lived through the hyper
inflation of the late 1970s and I had a home with a 21% mortgage rate.
Don't think it won't happen again. Anything is possible when the current
generation has no collective memory of the past. Have your parents warned
you about the Great Depression? My mother is 93 and she had vivid
memories of the struggles to simply survive the depression. The younger
generation today has no collective memory of the depression or the hyper
inflation of the 70s. They were too young. They don't understand what can
really happen if the right decisions are not made over the next few years.
If you had a dozen one ounce Krugerrands or Maple Leafs in your safe for
a rainy day and that day came how would you spend them? You can't take a
gold coin to the service station and get a tank of gas. You need something in
a small enough denomination to actually spend on day to day necessities. If
buyers of treasuries continue to see our debt rise eventually even the most
hardened believer in the U.S. will grow cautious. When that happens and the
interest rate on our debt goes to 100/0, 15% or higher, there won't be
anyone to bail us out. The good faith and credit of the U.S. will fail and our
dollars will be worthless.
In multiple countries in the last 100 years they burned currency for heat
because it had no value as money. I am not a gold bug per se. However, I
do believe over the next nine years our country is going to go through some
really hard times. Dollars will decline in value significantly and only those
with hard assets will survive and prosper. Silver is one of those hard assets.
It is actually an asset that can be used as money. Did you know the
government is required to produce silver coins for ownership by civilians
because lawmakers in the past realized there was a possibility of paper
money becoming worthless?
Silver will make an excellent hedge against inflation. It is dollar
denominated and it is readily available in coin form. As the dollar declines,
for whatever reason, the value of those coins goes up.
Secondly, even if by some miracle the U.S. pulled out of its pending debt
crisis there is still going to be a silver shortage. There are more than 10,000
uses for silver. The vast majority of those uses consume silver permanently
so it cannot be reclaimed or recycled later. Silver is used in electronics
manufacturing. With new electronic gadgets being sold in the millions every
month the global supplies of silver are shrinking. iPhones, iPads, Ereaders,
solar panels, flat screens, DVDs, medical equipment, hybrid and electric cars
and thousands of other products. Nearly everything uses silver. Demand is
rapidly approaching the amount mined every year. Over 900/0 of all the silver
ever mined has been used up.
The coming economic stress is so easily seen by so many people that
individual investment in silver is at an all time high. Since 1998 the
individual ownership of silver has increased by more than 4000/0.
The Federal government announced in 2000 that the stockpile of more
than three billion ounces of silver had been eliminated. It was gone,
consumed. In 2002 lawmakers passed a law enabling the government to buy
silver on the open market to replenish strategic supplies. The government
had to buy silver on the open market to fulfill their mandate to mint silver
coins. They still had to halt the minting of some coins due to a lack of silver.
Other countries are also stepping up their purchases because silver is such a
vital part of the manufacturing process a shortage of supply would actually
damage their economy. Silver demand in China is expected to rise +40% in
2012.
Current annual demand for silver is more than 878 million ounces.
Current mine production is just over 725 million ounces. Existing supplies
today just over 1,000 million ounces. At the current annual deficit of 153
million ounces those existing supplies will be significantly depleted later this
decade. This is even more true when you learn that silver mine production is
slowing. The easy silver has already been mined and the current deposits
have a much lower grade of silver than those just a few years ago. This
means more work by the silver miners for less production.
The U.S. Geological Service estimates there could be an extreme
shortage of silver by 2019.
Silver could follow the same trend as rhodium, which rose +2,000% and
palladium +850% when supplies declined to minimal levels and mining could
not keep up with demand.
Because most consumers live in a daze and have no clue what the future
holds there will be a real rush to buy silver when the bad news begins to
dawn on the population. When interest rates begin to spike we will see silver
prices spike as well. Those who have planned ahead will reap the benefits.
Rich Dad, Robert Kiyosaki, claims "silver is the best opportunity
I have ever seen."
Billionaire Eric Sprott calls silver "the investment of the decade."
Jim Rogers said on Dee-5th, "Buy silver today, not gold."
I am not selling a silver investment or a subscription to a silver
newsletter. I have no reason to share this information with you other than to
help you profit from the rough times ahead when the U.S. debt becomes
unmanageable.
If the debt crisis goes the way I expect then owning silver coins will be a
life saver. If the debt crisis does not implode then the shortage of silver for
manufacturing will also produce a windfall profit for everyone who plans
ahead.
What silver should you buy? There are many options and fortunately most
of them are cheap. You can buy old U.S. silver coins. Any U.S. dime,
quarter, half and dollar minted in 1964 or before is made from 90% silver.
With silver at $32 as I am writing this a silver dime is worth $2.31, a quarter
$5.79, half dollar $11.57 and silver dollar $24.75.
Collecting silver coins is relatively easy. Any coin shop will have them by
the pound and you can always find them on Ebay. They are cheap enough
you can buy a few dollars or a few hundred dollars at a time. The table
below shows the silver content of each coin and the actual value on the day
I wrote this article. The smaller coins trade fairly close to their actual silver
values but the silver dollars sometimes carry a small premium to actual
silver value.
The benefit of collecting actual U.S. silver coins is they are a known
commodity. Anyone in the U.S. knows a dime, quarter or half. They can't be
readily counterfeited and they come in denominations small enough to
transact normal business if you ever needed them to buy something. Trading
a couple quarters for a tank of gas in hard times would be an easy
transaction.
Selling them is also easy. You can call any coin shop and say I have a roll
of silver quarters ($240 value today) and get an instant quote. If silver goes
the way most people expect that roll of quarters will be worth $750 to
$1,000 in the years ahead.
Another form I like is the U.S. Silver Eagles. These are one ounce .999
silver coins minted by the government since 1986. They are one ounce so
they trade very close to the actual value of silver. They are recognized as a
U.S. bullion coin, guaranteed as to weight and quality by the government,
and readily saleable anywhere in the USA. You can buy them on the used
market as single coins or in rolls of 20.
Another way to invest in silver would be the Silver ETF(SLV) or a silver
miner like Pan American Silver (PAAS) or a silver streamer like Silver
Wheaton (SLW). Those are great options for a mild dose of inflation or
economic problem but in a worst case scenario I would rather have hard
silver that I can take to the store and actually use to buy something. MF
Global customers are probably wishing they had hard gold and silver in their
safe instead of a line on a brokerage statement.
While nobody can be 100% sure of any future outcome, I am pretty sure
the U.S. will at the least have a serious case of inflation in the years ahead.
There is no other way out of the problem of excess debt other than a
default. The current chronic unemployment could last the rest of the decade
and that will emphasize the impact of any future recession or period of
economic stress.
If you take my advice and add some silver coins to your home safe I am
confident you won't lose any money because of the coming silver shortage.
Worst case, they don't go up as fast as they would in a period of economic
stress. I am adding to my collection every chance I get and I recommend
everyone do the same. Consider them an insurance policy against an
unwanted future.
Jim Brown
News 
Market Data 
Discover 
