Silver: The Last Great Thing - For Now

Silver, the most volatile substance on Earth aside from volcanos, is about to go parabolic. We've seen some nice gains so far, but silver is always the last horse out of the gate and it's always on steroids. Gold will continue to rise in US Dollar terms because it's the best barometer we have concerning credit/monetary inflation. Silver, however, is where the money will be made in March and April.

Silver has much to recommend it long term - several critical tech applications - and it remains one of the very few affordable hedges against inflation that we'll most certainly face for several years. But it is the short term you need to consider, in part because we are in an investment environment that is demanding and immediate on both the attention and reaction scale.

The two best, and simplest, ways to play silver are through an ETF and a silver developer and current producer. Physical silver is bulky, the markup is too great, and the resale is always - I repeat ALWAYS - marked below spot.

The ETF(s) are PowerShares DB Silver Fund (DBS) and iShares Silver Trust (SLV).

Each has something to recommend it, but either provides the practical investor with two advantages:

1. Either can be traded in seconds from any equity account.

2. Either charges a nominal management fee - much less than you would experience in either the physical buying or selling of silver.

The only - and by far the best - equity I'd suggest is Coeur D'Alene (CDE). It has the best of both worlds, a current productive capacity that is increasing in value as silver increases and development properties that are very near actual production. My minimum take on CDE's Net Asset Value [NAV] is $7.00 - and that is conservative.

Disclosure: Author holds positions in the above-mentioned securities

Comments

[Dude]

CDE has been a dog for years. Look at what SSRI has done vs CDE the past few years. CDE is to Silver what DROOY is to Gold.

Full disclosure, I own all three.

[treefrog]

i looked at cde a while back, and when i saw their debt levels, i lost interest. paas, yes! ssri, yes! smr.v (son of ssri), yes!! cde, no thanks.

pax
t.f.

[Georealist]

This is Greg Pinelli, the GeoRealist. Everything is a dog until it isn't. CDE has strong late development stage properties with immense silver and slightly less immense gold reserves. If it had already moved it would hardly be worth recommending as a mid stage precious metals equity. Also, the analogy to DROOY is shallow...DROOY is So. African with a taste of New Guinea (which is now sold)..CDE is internationally diversified and is far "younger" as a precious metals producer/developer...d...

[Dude]

The reason I compared CDE to DROOY is because both have been pumped by Gold-Eagle for a decade. Many Gold-Eagle readers have missed out on this historic bullmarket trapped in those dogs. Nevertheless, I hope you are right. I sold some SSRI and bought CDE about a year ago.

[Jake2]

What about Hecla (HL), also in Coeur D'Alene? They were up 16.63% last week.

[Georealist]

This is the GeoRealist...there are many comparisons one could make with other miners...there are 3 things that set CDE apart..
1. It has the rare mix of current net productive assets..this means that even if time is required to develop new properties they have the means to do so without incurring loads of debt..or diluting the share base
2. They have a truly impressive potential base of silver to exploit..
3. Silver is THE next thing.....this isn't a guess or hope on my part..it will happen within the next 6 weeks.

[The "DUDE"in CD'A]

Georealist,
Are you just shooting from the hip with your prognostication about the next 6 weeks.
Or do you have some clairvoyant or inside knowledge regarding the price of silver??
Either way i hope you're right.

[Georealist]

GeoRealist here..I've watched silver for 30 years...I never shoot from the hip. It has VERY distinct patterns...and highly volatile ones. What you need to watch is how quickly it moves thru this imminent cycle..If it starts soon (days) it will end soon...give its run a few weeks but don't sell mid explosion. A move past $22.50 would not be shocking.

[StateofConfusion]

If someone owns a bag of silver quarters bought years ago, would it be better to just keep them or possible sell when silver gets above $22/oz ? They have some "currency' value in an emergency.

[EE]

Well.. according to Jason Hommel and Ted Butler with silver being so limited in supply and so important industrially and the ETF not provding share holders the ability to cash in for physical silver under 50,000 ounces. they make a case for $200--$350/oz and not using ETF'S very far into this year as it is a paper promise that can be voided. Thus any premium paid to coin shops,on line dealers or the US.MINT to take delivery will be a non-factor. My cost basis with delivery is $14.10 and it matters not to me. Why sell @ $22.50 ?

[Georealist]

EE..This is Greg Pinelli..if holding physical silver appeals to you, then by all means be my guest. The idea that the ETFs don't have physical silver is not true. Taking delivery would be a nuisance and defeats the entire purpose of taking advantage of a precious metal rise with the least possible effort. The notion..promulgated by alarmists and conspiracy theorists like Butler..that you'll wake up one morning and SLV will be bust is nonsense. Coin dealers are scared to death they'll lose their monopoly. If someone loves paying huge premiums and needs the lifting experience be my guest
Also...anyone who thinks silver coins will ever be used in a truly chaotic economic situation has been reading too many old Howard Ruff newsletters..you'd be better off with cases of cigarettes and Jack Daniels..and a pistol.

[Dude]

Greg nice move by CDE today.

Regarding silver, hold onto till $25. That was a major pivot in the early 1980s.

Cheers!

[Pitbullfrog]

Have you bothered comparing the performance of CDE versus the Silver ETF (SLV)? The price of silver has doubled, up 100%, while CDE has done nothing. Why - one reason is CDE's management. They hold very little insider shares and they all sell as soon as their options allow. Hedge funds have been long silver, but short CDE. Hedge funds have no fear of shorting CDE because of a huge float, no dividend, and zero share buybacks. If CDE was any good, it would be already be 7 or 8 bucks a share.

[pseydocyst]

it always amazes me how yearly production
ratios of silver to gold keeps declining, currently
about 7, and historically it's been around 14-15.
Yet silver is still 50 times cheaper than gold. There's definitely something wrong with this
picture.

I'd definitely trade in my fiat dollars for silver
@ this point.

However I do not believe ETFs are the way to
go. It's best to take physically delivery. That way
you control the silver. To buy ETFs means giving
your money over to an entity which may or may not hold the silver. It's basically an unallocated pool account. IF these SLV truly have the silver they would have quite substantial storage fees. Yet SLV or GLD charge a fraction of 1% in fund fees, and the spread is very low. This obviously doesn't make sense. That's why I believe these ETFs should be completely avoided, and the smart money knows this.

[bcr]

Physical storage on $3.5B of silver costs far below 1% a year due to economies of scale. IIRC storing a few thousand dollars of silver costs ~0.75%/yr retail (kitco), just 0.25% more than SLV charges (0.50%). Even so I'm holding SLV for now, for convienence. IMHO the banking situation is not bad enough to justify physical delivery quite yet.

[pseydocyst]

Less than 1% per year cost to store 3.5 billion worth of silver?
You have any evidence to back this up? Or are you just guessing?

[Manitas dePlata]

CDE used to trade at a parity to silver during the run from 5 to 7.50 or so, then it tanked and has never recovered, they couldn't make a profit when silver finally broke out above 5 and apparently they still can't.
Physical silver is sort of a pain to deal with as 1000 ounces weighs around 80 pounds. A mix of both physical and ETF is nice, physical makes it easier to stay long since it is such a pain to sell. 100 ounce bars don't have much of a premium (7% round trip or so), the ETFs are extremely easy to deal with. I think Everbank has assigned physical if you are paranoid.

[kdmcards]

Silver bullion on eBay actually sell about 10-15% above spot. This makes owning the actual metal worth while.

[northstar10000]

This boils down to 2 questions. How you answer them depned on whether you buy CDE aor take a pass.
(1) I silver going to be much higher than 20 per oz?
(2) Does CDE present the lowest risk option taking Risk/Reward
into consideration.

I think most will agree that quetion number one is a yes.
CDE presents the highest risk reward ratio of the possible options for trading/owning silver. I think the arguement is about risk/reward comfort levels. If you are comfortable with the highest risk-BUY CDE. Obvioulsly futures might be more risky but that is only a timing risk, not a directional risk.

[Silver Vegas]

If you think CDE or HL will not crash and burn, then why not buy the stock and collect rent on them; by writing [selling] covered calls against the stock you own. Sell the calls when the stock has rallied; buy them back when the stock has tanked. Or just let them expire and do it all over.