Physical Silver: How To Stack With Stealth

by: Biz Bluetree

"…when this thing really gets going, the silver price is just going to explode."

- John Embry, Sprott Global Assets

I like the sound of that. Though silver spot price has been in a sub-20 sideways slumber the past two weeks, and could slip even lower, with some saying another steep decline is possible, I'm buying all the way down. Silver's true value suggests its price has nowhere to go but up.

Slowly people are realizing this as an inevitability and putting their hands on the real stuff in increasing numbers.

If you stack silver and you know why you stack silver, welcome to the new 1%, this article is written for you.

If you're not interested in stacking silver and don't agree in an importance to do so, you may feel you've misspent your time reading here.

If you agree that transferring paper currency into physical silver makes sense as an alternative savings account outside the banking system, you too may agree; like a fine wine, no silver shall be exited before its time.

The basis for that sound reasoning is echoed in one reader's comment from another article who after talking about the Cypriot bank bail-ins, said:

"Screw the banks. If I'm forced to store my own cash because the banks are so irresponsible, the logical solution is to convert paper to metal."

Welcome to the new 1%

No one knows for sure the percentage, which is one of the beautiful things about stacking the physical - it's a private practice - but I've heard say only two percent of Americans hold physical silver and gold.

We're focusing on silver - let's get into it

Some readers agree stacking silver makes sense, yet they ask, "What is the best way?" Is it hold-in-your-hand bars or rounds from Sunshine Mint or Engelhard? Should I accumulate government minted silver bullion coins? Which ones? Where do I buy? Is this a good deal on eBay?

To address these questions the best way I know how is to outright show you Bluetree's method of silver stacking and where and what I buy. I should also have my head examined. I hope this is helpful.

Note: you are wise to avoid buying precious metals on eBay, and also to be aware the best and most reliable dealers don't need to advertise on TV.

In discussing Bluetree's method,

We will discuss what to have and to hold and where to buy. Not how to keep it safe or how to protect. That's personal.

You already know why you stack so let's focus on getting your hands on the best stuff at the best prices.

For purpose of this discussion, we begin:

*One ounce of silver bullion means one troy ounce, weighing 31.1 grams (same for gold) and generally minted in three nine (999) purity, although the Royal Canadian Mint produces four nine (9999) pure silver bullion coins.

*The lowest measure of purity still to be considered "bullion" is 92.5, which is Sterling Silver - though I don't buy it. 90% silver coins fall shy of bullion status.

*A coin can only be called a coin when issued by a sovereign government. A planchet of silver pressed at a private mint is not legally a coin and must be advertised as a round.

The Bluetree Method

In the spirit of privacy I prefer three specific one-ounce, silver bullion coins that carry exemption from IRS 1099B reporting. Before I go any further - I am not a tax professional or financial planner and by law cannot advise you. The examples in this article are my own thought-based strategies. I suggest consulting a tax professional before adopting my ways for my reasons.

But, exempt from 1099B? Yes.

I've learned over time through help from credible sources (confirming one here for purpose of this article) that if you sell 1,000 or more ounces of silver to a dealer, he is obligated to fill out form 1099B and report the transaction in his IRS filings, unless the sale involves one of the following three exempt silver bullion coins: the American Silver Eagle, the Canadian Silver Maple Leaf or the Austrian Silver Philharmonic. (You will notice compliance differs slightly for gold)

On the other hand, if 1,000 or more ounces of silver bullion is sold to a dealer in the form of privately minted silver rounds or any sized silver bars, or even other government minted bullion coins; Mexican Libertads, British Britannias, Australian Perth Mint Koalas, Kookaburras, etc. and Chinese Pandas among others, a 1099B form is to be filled out and submitted with the tax filings of the commercial buyer.

Good-bye, privacy. Hello, capital gains.

But, of course, that's only if you intend to sell your silver to a dealer, which I have no intention of doing.

If your strategy involves trading high valued silver assets up to another asset class within the correct market time frame to realize new wealth, you can stack any form of silver you prefer.

Personal, the nuances of play will differ for everyone. But, for as important to me the legal, stealth aspect of exiting silver, a comfort level exists buying and holding my silver in these three Cadillac coin types.

#1 The American Silver Eagle, first issued in 1986, is the only one ounce silver bullion coin denominated in USD and carries a $1 face value. American Silver Eagle coins are the most popular silver bullion coins in the world and are said to be minted exclusively using silver mined in the United States.

The obverse of each American Silver Eagle features Adolph A. Weinman's Walking Liberty design, which was used on U.S. half dollar coins that circulated from 1916 to 1947. The obverse is also inscribed with the words LIBERTY, IN GOD WE TRUST and the date.

The reverse of each American Silver Eagle features Chief Engraver, John Mercanti's bald eagle design paying homage to the Great Seal of the United States as the eagle hovers beneath 13 stars holding an olive branch and arrows in its talons. The coin is inscribed with the words UNITED STATES OF AMERICA, 1 OZ. FINE SILVER, and ONE DOLLAR.

2012 American Silver Eagle coin, obverse. Photo: providentmetals.com

ASE coins contain one troy ounce of 999 fine silver and can be purchased from a reputable online dealer individually, in stacks of 20 (lowering the premium) in an official U.S. Mint tube, or in lots of 500 coins stacked in 25 tubes master packed in a green U.S. Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.

Note: In the spirit of privacy remain aware that whether for purchase of silver, a new car down payment or a deposit in your bank account, $10,000 is an IRS reportable transaction.

I comply with all tax laws and do not suggest anyone do otherwise. Rule of thumb: adhere to the law and sleep better at night in your own bed.

#2 The Austrian Silver Philharmonic, first issued in 2008, is the only one ounce silver bullion coin denominated in EURO and carries an E1,5 face value.

2009 Austrian Silver Philharmonic coin, obverse. Photo: prividentmetals.com

ASP coins contain one troy ounce of 999 fine silver and can be purchased from a reputable online dealer individually, in stacks of 20 in an official Austrian Mint tube, or in lots of 500 coins stacked in 25 tubes and master packed in a black Austrian Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.

Celebrating the Vienna Philharmonic Orchestra the obverse of this coin features the iconic Great Organ housed inside the Golden Hall of Vienna, Austria and inscribed with REPUBLIK OSTERRIECH, 1 UNZE FEINSILBER, the date and 1,50 EURO. The reverse of each coin depicts a bouquet of orchestral instruments; a string bass surrounded by cellos and violins, bassoon, harp, and Viennese horn.

#3 The Canadian Silver Maple Leaf, first issued in 1988, is a one ounce silver bullion coin denominated in Canadian dollars and carries a CD5 face value.

Canadian Silver Maple Leaf coin, reverse. Photo: providentmetals.com

CSML coins are extra special as they contain one troy ounce of four nine (9999) fine silver and can be purchased from a reputable online dealer individually, in stacks of 25 in an official Royal Canadian Mint tube, or in lots of 500 coins stacked in 20 tubes and master packed in a yellow Royal Canadian Mint monster box. Monster boxes are unopened and strap-sealed by the mint. Buying this amount will incur the lowest premium per ounce over spot.

Perhaps one of the most trusted bullion coins on earth, and hailed as the world's first pure bullion coin, the Canadian Silver Maple Leaf features Canada's iconic national emblem, the five point maple leaf and the markings CANADA 9999 Fine Silver 1 oz. Argent Pur on its reverse. The current obverse depicts the Susan Blunt design of an elder Queen Elizabeth II, the face value "5 Dollars" and the date. Coins dated earlier feature the image of a younger Queen Elizabeth II.

Modern Numismatics - Graded & Certified Bullion Coins

Also a coin collector, I own several graded and certified pieces. But, would suggest unless you enjoy owning these for their flawless beauty and perfect MS 70 pedigree don't rely on them for your stacking strategy. Not cost efficient costing three times and more their raw coin counter parts.

Click to enlarge

I have stopped pursuing graded and certified coins as they no longer align with my goals. In the end if silver is priced the moon, I doubt these slabbed coins will fetch the stars based on their numismatic value.

Similarly, Morgan and Peace silver dollars (1878-1901 and 1921-1935) are fun to collect and beautiful to behold, but, I no longer pursue them. Some date back 135 years and I'll probably hold on to them for their history, but they're not for stacking as each silver dollar weighs less than an ounce of silver at .7734 troy, but cost more than the full ounce modern silver bullion coins.

Pre 1965 "Junk Silver" U.S. circulated coins dimes, quarters, and halves up to and including 1964 contain 90% silver (including the first year of the Kennedy Half Dollar). Also known as constitutional money, junk silver is an important staple if you're stacking for the same scenario, though you'll be hard pressed to find these in circulation today. To obtain junk silver one can hunt bank coin rolls (deposited by bank customers) if you have the time and feel lucky, or you can buy them from a reputable online dealer. I see these coins as functional in a barter situation and for small transactions, etc. as they are fractional and easily recognizable.

Note: Each $1 (face value) of these 90% silver coins contains about .715 of a troy ounce of silver. For my own purpose I look at 14 dimes as about one ounce silver, 12 quarters as about two ounces silver, etc.

Don't be fooled

Note: The 1965 to 1970 Kennedy half dollar coins are clad of 40% silver. And it should also be noted, the short-lived Eisenhower dollars that are clad of 40% silver (very few) - 1971 to 1974 with S mintmark only - are mostly found in proof sets as these coins (with silver content) were minted with the coin collector in mind. There were many more Iike dollars minted for circulation in those years bearing the S mintmark clad of cupro-nickel (like modern coinage) containing NO silver.

Where do I buy?

You may already use an honest and reliable, customer-centric, bullion and coin dealer. I say great. That's half the equation in this endeavor. If you do not have such a dealer, here is my choice, Provident Metals. I also use APMEX from time to time. (I receive NO compensation from either dealer)

Conclusion: If it takes 13 or so ounces of gold to equal the Dow and some 62 ounces of silver to equal one ounce of gold when historically the silver to gold ratio has been 50:1, 16:1, 15:1, 10:1 and even 1:1 in ancient Egypt, what is silver's true mean?

We may never know, however, silver's true value - its purchasing power - should become obvious.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.