on silver - by "the myth guy"

  1. dub
    29,540 Posts.
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    Good morning ,

    The following is written by the author of the 47 Reasons posted earlier. His name escapes me (and the 47 reasons have now nbeen increased to 51).

    Nevertheless, silver is not divorced from gold, and the following may be of interest to some.

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    SILVER!
    All the reasons for owning gold also apply to silver, but silver has other features which make it even more attractive.

    1. The historic silver/gold ratio was 15 or 16:1, but in recent years, silver is relatively cheaper ranging from about 40:1 to 80:1. On Dec 4th, 2002, with silver at $4.56/oz. and gold at $322/oz., the ratio is 70:1. This means that silver is currently undervalued, and cheaper, and thus a better investment if you want to "buy low and sell high".

    2. The supply and demand fundamentals for silver are extraordinary. There has been an ongoing supply/demand deficit in silver for 12 years. More silver is consumed by industry than can be produced by mining and recycling combined. Some say this deficit reaches back 60 years, and has consumed virtually all the known silver ever mined since the beginning of the world. Considering known silver reserves, there is far less silver in the world than gold. About 70 million ounces of silver vs. 4000 million ounces of gold.

    3. Most silver, 70-80% brought to market, is mined as a by-product of copper mining, gold mining, or zinc and lead mining. There are very few "silver mines" in the world, since most are really copper or gold mines. Therefore, mild increases in the price of silver will not bring substantially more silver out of the ground. Most silver is consumed in photography, by Hollywood. There is so little silver used in each photograph, that price increases in silver will probably not reduce demand. With a relatively inelastic supply, and realtively inelastic demand, it will require a dramatic explosion in price to bring the supply and demand deficit back into balance.

    4. Famous Billionaires have bought silver in recent years. In 1997, Warren Buffet bought 130 million ounces of real silver, due to the favorable "supply and demand fundamentals", and although he bought as much as they would let him legally buy, his purchase was with less than 1% of the value of his portfolio. Another Billionaire who tried to follow in his lead would be unable to do so since there is less silver now available in the world to buy at the COMEX than what Buffet has, and less than that in known, reported silver reserves in the world. George Soros owns a large percentage of a silver mining company, SIL. Click on the link and then click on "Top Institutional Holders" on the left. Bill Gates owns over 10% of another silver mining company, PAAS.

    5. In the gold market, there has been a large increase in paper futures contracts which are used to suppress the price. See my essay, Controlling Gold with Paper. In silver, the relative amount of paper contracts is much larger. In other words, there are more paper shorts who will be caught in an impossible situation when the price of silver really begins to rise due to the fundamental supply demand gap. They will be forced to buy silver or go bankrupt. Either action will cause a dramatic rise in the silver price. If they default on the silver contracts, that will signal to the world the severe shortage of silver, and signal a great investment opportunity.

    6. At $4.40/oz in silver, you can buy U.S. coins dated 1964 or earlier, $1000 face value in a "BAG", which contain 720 ounces of silver, for about $3400. In the early 1980's, when silver was $30-$50/oz., a bag of silver could be used to BUY A HOUSE! Imagine buying the money for your next house for $3500 today by investing in silver!

    7. You get so much silver for your money. A $1000 face value bag of quarters would contain 4000 quarters, and costs about $3500. It weighs about 55 pounds, and is the size of a bowling ball. If you invested $100,000 into junk silver coins, at $3500/bag, that would give you 28.5 bags each weighing 55 pounds, or 57 bags weighing 27 pounds each, or about 1571 pounds total. Could you imagine moving that much around your house if you had to move? Silver is so cheap it creates physical problems for investors today!

    You will sometimes find quarters in a bag dating back to the late 1800's. In the early 1900's, you could work ALL DAY for a wage of ONE SILVER QUARTER. Imagine being able to buy a day's wage of real money for less than a dollar of today's money! Today, in 2002, a day's wage is over $100. Another way to put it is that the dollar has lost over 99% of it's purchasing power over time, yet, due to silver being undervalued, you can get 100 times the value of your money and labor if you invest in silver. Imagine if they paid a day's wage today of $100 in silver quarters; they would have to give you about 100 silver quarters today. The implications are that if silver returns to its historic valueations, silver will need to go up in value about 100 times, to $450/oz. Silver is truly a bargain.

    I recommend that you visit your local coin shop in your local metro area to buy "junk" silver coins.

    If you want to learn more about silver, I suggest you read the works of the following people who are experts on the silver market:

    David Morgan at http://www.silver-investor.com/
    Ted Butler at http://www.butlerresearch.com/

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    bye.dub


 
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