The Coffee Shop Knows Why Silver May Be Your Best Insurance Policy

 |  Includes: SIVR, SLV
by: Brian Bobbitt

This article is focused on the price of silver, my thinking that it has seen its lows since the old high approaching $50, will return to that level and surpass it by some amount in the near future. I feel that percentage-wise, silver has the potential to go past all other investments in returns this year. I think, the price has seen the bottom, and in a lot of my writings, if seen, you can see I was waiting for $26.26 in sliver to prove that it was the major support, and likely to not ever see below that support. Now is the time, and this article is to show you how I am taking advantage of silver currently.

Technically speaking, if you like charts and other tea leaves that seem to predict the future, those also support my thinking of higher silver prices. the Cup and Handle is a good one. Predicting higher prices as the handle formed and then shot up today. 4/9/13. There are many bullish technical chart formations, and one more would be how silver just burst thru the Ichomoku Cloud, and rose over $28.00 from the low $27 in one hour. These 'tea leaves', as I call them, can help, but also can lead you into a wrong trade so be informed.

I am not interested in mines, although they have been hit pretty hard, and with all the problems of running a company, the ETFs do not have those dragons spitting fire at them, and I believe the place to be is in the real price of silver and not have any strings attached. Silver goes up, my bank account goes up, (and down of course accordingly).

Silver now has done about what I have said in my many posts and comments here in Seeking Alpha. I have long predicted a fall to the $26.26 area of support and then higher prices. I was not ready to publish this article for a long time and now I am super ready for it to be seen by my readers and followers. I don't know where all this is headed but I feel my article's time now is here and should be read by all investors. I feel that the basic economic fundamentals will cause silver to rise up in price, perhaps not the more than 500% rise we saw recently being repeated, but I do believe silver is the best bet on the block. The following article should help you see what I mean.

I see inflation rising, and a good insurance policy against higher prices, so to speak, is needed. There is a lot of talk regarding the US Dollar, and its survivability. I don't believe the U.S. Dollar will collapse or disappear. I am, however, concerned with how much it will buy in the immediate future compared to what it will buy today. I am convinced we are headed for inflation. This will adversely affect every American's savings.

My ability to manage my own personal spending and savings habits, paint the picture of my financial future and ability to use the events unfolding in front of me to my advantage. Then I can take action as I deem fit. Looking at the debt clock intensely I will begin to see the hurdles ahead of me.

I've worked hard for my savings and I'm not about to toss them away now. Inflation could eat up a major portion of my buying power. With interest rates so low, I are forced to take inappropriate risk to get returns to save my net worth. Those risks could wipe out an inordinate amount of my needed nest egg.

I would imagine this article will elicit some comments for and against silver. I feel owning silver is the best way to win over inflation, but it is just one way. In recent memory, the inflation rate was near 20%. There are many ways to invest in silver. I can strongly suggest American Silver Eagles. For people who don't have thousands in cash to send in for 500 coins, I don't want you going to pawn shops, or just any dealer because the premium they will charge you to buy and sell is exorbitant. So watch where you buy. I have recommended the Tulving Company. They have a great round turn price and usually pay for the shipping. It is always nice to get your product immediately as they use overnight delivery.

Many times I cannot afford to buy their minimum, sometimes a consortium of my friends will go together and buy them. I have been buying silver for over 35 years, in fact, since 1981. I still have a Mexican Peso, una onza, that I bought for about $2.50. I do buy known silver coins at spot price. Even a dollar or so over is okay, and you will also give up some of your move on sell-back.

Demand is high, industrial demand, investment demand all rising and supplies are getting scarcer. Over time silver beats DOW percentage-wise. I am sure you see many people holding signs on the streets hawking your precious metals, mainly gold. Why are there so many doing that? Do you suppose these gold traders at least suspect a rise in price of the precious metals? There are corners here in the Palm Beaches which have multiple sign wielders. Not just a few.

Look at my silver charts, (this is one of many you can find on line) along with other precious metals and you can see that during these tough times the PM's (Precious Metals) have risen better than any other sector. For the most part better than most issues of stocks, bonds or other financials. Go to my last article, and see the precious metal charts there.

Another way to start in a small way is the ETF's which I invest in myself, like iShares Silver Trust (NYSEARCA:SLV), or ETFS Physical Silver Shares (NYSEARCA:SIVR) There are many others also which I feel would just confuse the issue. These silver ETF's pretty well mirror the actual spot price of silver, which is what you should be your concern. The spot price of silver is slowly working its way up if you look at a 5 year chart.

Price of Silver per Ounce (in USD) Silver Price Chart 5 years in USD per Troy Oz

Source: Kitco

Right now, with the chaos in the thinking of the investors, the metal price has traded in a narrow range, and when all the financials are in and the fiscal cliff behind us I am convinced the price will work its way to new highs soon.

If there is any way, start now, get what you can. Don't put everything in silver. If you have the ability, look at palladium, platinum, and gold of course. Now, here is a thought. You have copper coins in your pocket? NO? Now look again and pull out the pennies. Well, how about this? I have been buying copper one ounce coins. Just in case things do get really silly out there. Will a couple of copper one ounce coins get anyone's attention for payment? Well, I bought some. Copper may well be money in much demand soon. When inflation does rear its ugly face in town money is money and copper has long been money. A few one ounce .9999 fine copper coins may not be a bad idea for folks who just can't afford to put much in silver. I am in that category and, well, see the picture:

Click to enlarge

Silver Eagle,

Watch out for bogus coins and sterling silver. There is nothing wrong with sterling. The only two things you need to know is #1: forget collectibles. You will wind up selling to a smelter and get less than silver value. Sterling is the silver to which England used to peg their money to. It is still called, Pounds Sterling. Sterling Silver is 90% silver. Do not buy any artifacts that are heavy and bright silver. #2: It is probably silver and it is most likely hollow and filled with clay. The way most silverware is made, even the good stuff. Know what you are doing.

There are two sides to every story and it has to be that way. With no down, there cannot be an up and so on. It is the natural way and the reason there is always such conflict in the markets such as in this article in SA by ISM Commodities. There are some very good arguments for a low or even non-existent inflation into the worrisome levels. Deflation is one of the strongest sides of the no-inflation coin. Like two captains in a verbal brawl about which is the best anchor or two God fearing individuals discussing religion. Things can look like rampant inflation and many precious metals merchants refer to the inflation of the Weimer Republic hyperinflation in Germany after WWI. This is not an ad for a gold seller, but an example of one side of the story. I totally feel these representations are grandiloquent and full of hot air. There are more realistic views and I feel a non-involved calculator is best. This one shows no inflation next year. I can't believe it though. Link to it and figure it yourself. There are other views, covering the entire spectrum regarding inflation. Some theories fuel my fire for this article and some hose it down. I also see arguments in it that makes sense but don't agree with the conclusions of most. I certainly hope these ultra views are wrong, in fact, I hope mine are wrong also and all is quiet in Willoughby, U.S.A.'s future.

Be sure you know what you are doing before you buy any coins, and buy only as bullion. Do not pay much over spot bullion price. I will discuss that in a later article. Numismatics is a whole different animal and a road full of potholes.

Just today, as I finish this article, I consulted with a retired banker whom I respect greatly. He is keeping his meager supply of Morgan Silver Dollars Click to enlarge

This banker suspects, as I do, as a result of the situation with our debt, inflation will cause silver to more than double during 2013. It is more than I would expect and certainly not what I want to see, but I can only report what reality tells

Conclusion: I feel inflation will be a formidable adversary in the near future perhaps as soon as early summer. To combat real inflation be it from demand or costs rising will be the monster we will have to fight. The net effect is to cost you more money for the same item. You must know and see it happening around you currently regardless of the numbers you hear. This time there are more factors, deflation being one of them. Just realize that the inflation monster is coming. I don't see how it can be avoided. I think silver will be your best insurance policy against inflation.

I certainly hope those of you with concerns or disagree with me comment as to your thinking and we can come to an intelligent conclusion. I pray I am totally wrong.

Capt. Brian

The Lost Navigator

*Cost Inflation is a word or situation that pushes prices up. I saw the last time inflation was a problem, regular inflation which is called, demand inflation which is the usual cause of higher prices, due to limited supply and rising demand. The reason I use 'cost inflation' is because I sensed something different was happening as the world was changing around me. These theories are many when we discuss the cause of inflation, therefore, I simply am concerned with "The Cost Of Living" and how to handle the higher prices.

NLY, ARR, FB, EUO & DRR, SPY & SSO, and I just got back into SLV on the 4th of this month at 10:25 AM with SLV @ $25.99 I also intend to purchase more silver eagles locally as they become available and likely double my position in SLV or get some SIVR in a short time. I am buying these in SEP and ROTH IRA accounts as if they go up as I think they will, the money comes out tax free. NOT DEFFERED as they are in a regular IRA.

This is not advice for you to act on, just information on my thinking and what I am doing in my own accounts. Of course this is all for entertainment, NOT to advise anyone to think I am a paid advisor, broker, or in any capacity advising anyone to do anything. Everything is risky, especially listening to me.

Please notice my disclosures. Please use updated charts also, chart appearances change daily, so use fresh charts.

Capt. Brian

The Lost Navigator

Disclosure: I am long SPY, SSO, ARR, NLY, FB, EUO, DRR, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a licensed financial advisor. I am a retired boat captain, former stock broker including insurance products. That was almost 4 decades ago, and my focus was NOT on investments for a long time. If you agree with me, before you invest in any form of silver or items mentioned here, consult your financial advisor. You must consider this article, 'Heard at the coffee shop.'