Faith in Silver . . . Misdirected?

I have been collecting silver coins for quite a while now. I always buy low, and sell high. Buying low is easy but selling high can take time. That's sort of self-evident in any investment. I am willing however to hold a certain amount of silver as I have faith in it in the long term.

But there is one individual on this forum, whose comments I have followed for quite a while, that shakes my faith, and that is Kurt. He has a strong and compelling position which is rather pessimistic of PM's in the long-term.

Yes if we follow the linear and logical conclusion of where our global society is headed economically in an increasingly digital and automated world it's a bad outlook for PM's, and many other physical assets. The question is . . . will there be a reaction?

If we look at history, real physical money always limits an economy's growth - however it is sustainable. Paper and debt allow an economy to boom and expand - however it is not sustainable. Where does massive global unsustainibility ultimately lead? It's sort of new territory for humankind.

How many silver-lovers out there really believe that at some point there will be a 'correction' in the market? Or are we really just dinosaurs hugging the past as Kurt says?

 

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I'm just about ready to dump my silver because of what you just mentioned. I think my money can do better elsewhere. I break even at $14.55 an ounce so thinking of taking a profit by dumping now. Problem is Dealers are buying back at a much lower price than they were a year ago.

 

Lots of good questions, asked in a more diplomatic way than I've seen here earlier, @rrholdout . I can't respond to you without more scorn from the <quote> cognoscenti <unquote> here.

I'm curious about two things, though, one deals with your perception of history, the other deals with the whole notion of bitcoin.

 

Well, as far as history, just focusing on U.S. 19th century, paper vs. specie was a major polarizing issue for political parties as well as citizens. Andrew Jackson wanted a return to specie, and no paper. He also was the only president to ever run the federal gov't at a profit and to pay down the national debt. So it was sustainable. Jacksonian democrats continued this position for a more rural sustainable economy throughout the 19th century, culminating in the late 19th with a strong push for a silver-backed dollar. Republicans at the time believed instead in an industrial economy that was pro-growth regardless of debt . . . to over-simplify. So it's an issue that has deep roots even in our own fledgling society.

As far as bitcoin . . . anything digital is more of the same for me. My wife and were talking the other night about how much our perception of money and wealth has radically changed over the last few generations. Increasingly our 'wealth' or 'value' is a digital figure on some remote database. As dinosaurs . . . we're uncomfortable with that. We like tangible things, that we secure ourselves. But honestly we're way out in left field back-to-the-lander 'Little House on the Prairie'-reading super-dinosaurs. I'm curious what the more mainstream position is here on the forum. Are we really that confident that silver will come into its own, correct its ratio to gold, and actually matter again, in a big way? Or are we just attached to old ideas?

 

Tough questions. Silver has only had two major bull runs. 1980 and 2011. I am not going to sit back and hope that happens again in my lifetime.

 

This may be overly simplistic, but a lot of people got burned by silver in 1980 and others got scorched a few years ago in gold and silver. I know a number of people who have said “never again.” Does that translate into a lack of buying needed for another price boom?

I’m not talking here about people who like to stack PMs for their own interpretations of the economic future. Also, it is not my intent to put those folks down.

 

Precious medals will always have value regardless of paper currency, wire transfers, bitcoin, or the number of goats it costs to buy a loaf of bread. Prices will always go up and down. The question is how long will it take and will it skyrocket again in the next 20 years? It's gambling of a different kind. I know that whenever I gamble I lose. I have to remind myself of that often. When I was going to buy a monster box of Eagles 18 months ago, I knew it was going to be a gamble despite the fact that it seemed like a really, really smart idea. I didn't do it. Why? Because whenever I gamble, I lose.

 

Hard assets will always hold intrinsic value, land PM's etc. Investing in itself is a gamble and what you invest in determines the risk you are willing to take. PM's are a long term play, buy it, stash it and forget about it. Silver is highly volatile and extremely risky as a short term play. Kurt has no idea what the future holds so why would you take investment advice from him or anyone else for that matter. The best investment advice I ever received was "Invest your money where you think it should be". Kurt has a major resentment towards an inanimate object, silver, and has made that quite clear. He needs emotional management long before giving investment advice. There are a bunch of billionaires and extremely successful investors that are, and have been, moving into PM's in the last six months. You want to go against the crowd, buy low and sell high. Hint, the stock market is nearing its peak and PM's are pretty low. China, Russia and the central banks are amassing gold and silver at an alarming rate, its no accident. They know what's coming down the pipe. Its easier to ignore than to accept and prepare. Trading worthless, debt backed FRN's for real money is a no brainer for me. Don't forget as well that when a stock market corrects itself it will bring PM's down with it at first and then they separate.

 

It's not that I take investment advice from Kurt, it's that I find a solid point of view that is a polar opposite to mine quite fascinating and like a thorn in my mind.

 

Well, first of all, if you want to invoke Kurt do a search on his name on the internet and you will see that he loves to argue with anyone and everyone and never really makes a lot of sense even though he try to pretend he is an expert. I've had him on ignore here for a long time.

But that is not the main issue. There is no such thing as investing in precious metals. There is gambling in paper metals in the hope of gaining a short term profit but that is not the same thing at all as there is no silver of gold involved. No one should buy silver or gold expecting to make a profit. That should be done in the stock market or real estate. And as someone pointed out, the stock market is due for a tumble. Real estate is likely to keep on increasing but it is not fungible and certainly cannot be turned around quickly in an emergency.

No, silver and gold are only for those who see their wealth in dollars (or whatever other currency) slowly being eroded over the remainder of their lifetime. Buying them with the expectation of ever selling them is the wrong approach. You should be buying them with the hope that you never have to sell them because when that need arises everything else will be collapsing around you. But if that happens then at least you will have them. Ask anyone who ever suffered through one of the many occurrences throughout history of hyperinflation what the significance of that is.

 

It is healthy to look at all sides of almost anything and come away with a fair and balanced perspective. Maybe you bought silver for the wrong reasons and are just discovering it. Its not that its good or bad but just a point of realization. Currently quite a few people are giving up on PM's. That tells me they weren't originally honest with themselves and either subconsciously or in denial bought into all the silver going to the moon stories. Now their patience has worn thin and throw in the towel in anger and disgust because they didn't make a fortune.

 

Well, not looking for investment advice. Always sell as I buy to sober the buying process. Not sure there could be any 'wrong reasons' for converting cash to silver, unless you paid too much.

No debate on inflation. I think the market-effect of printing all those dollars the last recession hasn't really hit yet.

Main question of the thread was . . . how confident are we all on an economic correction?

 

I'm not confident in either direction. I think diversity is wise, so having some small portion of my overall investment in PMs helps me sleep a little bettter.

 

There is no one who can predict with high probability such with the disturbance in the Force ( used in replacement of banned areas of discussion) that is in the world today, including human made and nature made. But there is great risk of Loss or great possibility of gain,if it goes conversely to your decision to go into it from one expectation or another depending on guessing right or wrong.
So its all up to you. I think there are several smaller moves ( both ups and downs) before the climatic ones come. I do not want to risk what I have in cash, stocks, property, bullion until I can see where the big moves are heading, so I will be one waiting for a smaller move and use 'paper' to gamble rather than buying another safe or moving amount of bullion for sale. But this answer , like all, is only worth the pixels it is made of.

 

Why do you assume that? One thing people always forget is that economics is an entirely human concept. There are no rules of nature. Military strength is and was what allows debt to exist.

No one knows for sure but, if you get more than two chances at a metal run up in your life time you're super lucky and hopefully took advantage.

Honestly that says more about you than him. I've certainly argued with him as much as anyone but at no point did I think he should be ignored.

 

I've tracked the stock market forever since below 2,000 DOW. There's always an article of an eminent market correction. At one point when the market was at 8,000 and then again at 15,000 I pulled my money out and into the Money Market to preserve cash from the eminent "now" crash !!. It never came, so I put my money back in and let it roll.

I also, or did, invest in junk debt for high return. A lot of junk debt is starting to have higher default ratios. Just look up junk car loans (junk = ppl with very low credit scores) ==> http://www.marketwatch.com/story/he...nore-rising-subprime-auto-defaults-2017-03-30
My investment was returning well over 10% (and that was "safe" junk debt). But now it's at 1.35%. And I expect it to drop some more. It's contract based, so can't really get out of each contract.

The thing about the market crashing is you have to have a stimulus to the crash. Some part of the economy has to go down first to start causing a domino effect. So subprime is usually the culprit. I pulled out of subprime, and put any debt into BBB+ Commercial Bonds which are still garnering 7.5-10+% annual returns.

Much less than the 10-45% returns you can get in subprime but also much safer. Of course I also own mutual funds, index funds, and individual stocks of which some are up over 70% since March.

I've mentioned this several times but I don't think of PMs as an "investment" but simply a storage of wealth. Which I only put into ASE/AGEs which can be leveraged as a hard asset with a good bank/CU (most rounds aren't).

Then I have a pretty looking coin collection/numismatic collection which I think is different. I only track it's purchase cost and not current valuations.

Stock investments can be more "safe" in a way, as long as you do your research, etc they can be pretty stable. Of course, if you put emotions first or research with a skew of looking for only positive information you'll probably lose.

In regards to PMs .. every one has different opinions on it.
Just look at the historical prices and determine what you want to do.
Think of past disasters and figure out how many times they dumped their cash and used PMs, etc etc.

To make good decisions one has to look at both sides of the argument no matter what it is. PMs will always be around, if anything, it makes great looking jewelry.

 

Great replies, thank you.

I guess when I use the term 'investment' I use it literally, as in 'investing' wealth in silver. But the colloquial definition does imply the expectation of profit, which I do not necessarily expect. If a silver dime buys a loaf of bread today, and it's $ value is say $1.30, down the path of inflation that $ value could turn to $20, but that same dime will still only buy one loaf of bread. So 'wealth storage' does fit best.

I also like debt-purchase as I've found flipping and financing land lucrative. There are a few websites where you can securely purchase personal debt with what appear to be handsome returns - obviously in proportion to risk. But the multi-year contract side of it has kept me from pulling the trigger. I prefer to be in and out on such deals within a year.

For me silver is not volatile. It's relationship with cash may be, but I think there is enough news out now to confirm that that silver/dollar relationship is artificially controlled by big players while gov't looks the other way - making it a very tough short-term market in terms of pure bullion. Now, however, if you purchase high-premium silver that offers an immediate 100%+ return for close to spot, my strategy . . . it can be short-term, and also offer some long-term stability as well.

For me, all of the signs point to mini-meltdowns and ultimately correction. Not apocalyptic . . . as that's a scenario in which honestly most of us would be miserable. We could simply readjust the currency as did Mexico.

 

Two things:

• The 19th Century USA economy and economic politics is probably not the best analog to our current global and hyper-connected economies
  
• PMs are one thing, the Stock Market is another thing, cash is it's own thing, but owning debt free 'good' land/real estate is often (outside of a Wall-E/Bladerunner future) a great and truly longer term valuable investment.

But I like to buy these shiny bits of metal for fun and a hobby. If I can make 15%+ profit selling the stuff at some point, all the better, but if I loose 15%+, no big deal. I've had fun and value while owing it.

 

If stacking silver and gold for profit is the only reason you do it, then you are gambling big time as mentioned above. Stacking silver and gold is in my case is a hobby. I like looking at and holding the coins in my hands. Plus, precious metals are far more interesting than paper currency. The majority of silver in my possession was added under $5.00 an ounce, so I am not worried about selling now or at $10.00 an ounce.
The stock market is a gamble as well, except when it crashes, it drops much faster than silver or gold.
Unless you are buying hundreds of ounces of precious metals at a time, your profits or losses are minimal when silver rises a dollar or drops a dollar. If you can afford hundreds of ounces at a time, there are much better returns on the dollar to invest in to start with. Just my 2 cents worth!

 

I am fascinated in a resignedly, almost ghoulish sort of way with the apparent popularity of the concept of possessing gold and/or silver as a hedge against the total failure of fiat currency. Having grown up in immediate post-WWII Vienna I was surrounded by and immersed in tales of the famine that swept the city during the latter part of the conflict, and the pertinent reality that I was able to glean from these stories is that all the precious metal in the world won't really be of any use when there is nothing at all left to buy. The only available "edibles" at that point in time were walnuts, acorns, berries and leaves, and those could only be procured through pure luck and industrious picking and not via financial transactions of any type, shape or form. When everything has fallen apart like that, no exceptions are accessible.